Question

Jamal is going to borrow $25,000 from his credit union to buy a used car. The APR is 7% and the length of the loan is 5 years. What will his monthly payments be? How much is his financial charge?

Answer 1

The monthly payment for the loan amount is $584.375

The financial charge = $10,062.5

Explanation:

Given as :

The borrow amount of Jamal = p = $25,000

The annual rate = r = 7%

The time period of loan = t = 5 years

Let The monthly payment amount = $ x

Let The amount = $ A

From compounded method

Amount = Principal ×
`(1+(\textrm rate)/(100))^(\textrm time)`

Or, A = $25,000 ×
`(1+(\textrm r)/(100))^(\textrm t)`

Or, A = $25,000 ×
`(1+(\textrm 7)/(100))^(\textrm 5)`

Or, A = $25,000 ×
`(1.07)^(\textrm 5)`

Or, A = $25,000 × 1.4025

∴ A = $35062.5

So, The amount of the loan for 5 years = $35062.5

Now, Interest = Amount - Principal

Or, Interest = $35062.5 - $25,000

∴ Interest = $10,062.5

So, The financial charge = Interest = $10,062.5

Now Again, As the time period = 5 years = 5 × 12 = 60 months

So, The monthly payment amount =
`(\textrm total amount )/(\textrm total months)`

or, The monthly payment amount =
`(35062.5)/(60)`

Or, x = $584.375

So, Monthly payment = x = $584.375

Hence The monthly payment for the loan amount is $584.375

And The financial charge = $10,062.5 Answer