Ask Question
17 April, 16:29

After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the dealer is no bargain. He has $2,100 cash for a down payment, so he needs an $8,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,400 for a period of two years at an add-on interest rate of 10 percent.

a) What is the total interest on Richard's loan?

b) What is the total cost of the car?

c) What is the monthly payment?

d) What is the annual percentage rate (APR) ?

0
Answers (1)
  1. 17 April, 17:31
    0
    a) Total Interest Paid in 24 months is $1680

    b) Total Cost of the car is $12180

    c) Monthly Payment is $420

    d) Annual Percentage Rate is 10.47%

    Explanation:

    (a) Loan Amount = $8400

    Interest Rate = 10%

    Monthly Interest = 8400 x (10%/12)

    = $70

    Total Interest Paid in 24 months = 24 x 70

    = $1680

    (b) Total Cost of the car = Loan Amount + Interest Paid + Down payment

    = 8400 + 1680 + 2100

    = $12180

    (c) Monthly Principal Payment = 8400/24

    = $350

    Monthly Payment = Monthly Interest Payment + Monthly Principal Payment

    = 70 + 35

    = $420

    (d) Annual Percentage Rate = (1 + 0.10/12) 12 - 1

    = 0.1047

    = 10.47%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers