Question

On December 15, Jim Wright purchased a new automobile. The price was $22,800 cash, or $2,000 down plus 60 monthly payments of $388 each. Jim decided to finance the automobile for 60 months.

Based on the above information, calculate the following: (All work must be shown to get full credit)

a) Amount financed
b) Total amount of the monthly payments
c) Finance charge
d) Deferred payment price

Answer 1

Given that Jim Wright purchased a new automobile. The price was $22,800 cash, or $2,000 down plus 60 monthly payments of $388 each. Jim decided to finance the automobile for 60 months.

Part A:

The amount financed is the amount he is owing after making the down payment.

Thus, the amount financed is given by the price of the new automobile minus the down payment = $22,800 - $2,000 = $20,800.



Part B:

Given that he makes a monthly payment of $388 for 60 months, thus the total amount of the monthly payments is given by $388 times 60 months = $388 x 60 = $23,280



Part C:

Given that the amount owed is $20,800 and the total monthly payment is $23,280.

The deferred payment price is the extra cost incurred by making monthly payments, this is given by $23,280 - $20,800 = $2,480.