Question

Make a down payment of $1500 and finance the rest of $20000 at 1.9% interest rate, making equal monthly payments for 5 years.

Calculate the total interest you will pay over the term of the loan. Show the computations that lead to your answer.

Answer 1

We know that we have to make a down payment of $1500 and finance the rest of $20000 at a 1.9% interest rate, making equal monthly payments for 5 years. Our first step to solve this problem would be to convert 5 years into months.

1 year = 12 months

12 * 5 = 60 months

Therefore, in 5 years there are 60 months.

Now lets solve this problem step by step.

Subtract the down payment from $20,000

$20000-$1500=$18500

Multiply the remaining number by the interest rate.

$18500 *1.9 = $35150

Divide 35150 by number of months in 5 years (60)

$35150 / 60 = $585

Therefore, you have to pay $585 per month.