Question

Big Ed’s car dealership is running a special on 2008 trucks. Big Ed offers financing at a rate of 6.71% on a loan with a term of 36 months, but he requires the customer to make a down payment of 15% of the cost of the vehicle. You are interested in a Car Crusher truck that costs $25,230. Not including the down payment, how much will you pay over the lifetime of the loan?

a.
$27,924.84
c.
$23,735.88
b.
$25,789.32
d.
$21,445.50

Answer 1

a

Explanation:

JUST TOOK THE TEST

Answer 2

Present value of annuity is given by PV = P(1 - (1 + r)^-n)/r
25230 = P(1 - (1 + 0.0671/12)^-36)/(0.0671/12)
P = 0.0671(25230) / 12(1 - (1 + 0.0671/12)^-36) = 775.69

Therefore, you pay 36 x 775.69 = $27,924.84 over the life time of the loan.