Question

You (or your parents) purchase a new car for $19,725.00 plus 4.75% sales tax. The down payment is $2,175.00 and you (or your parents) have an average credit rating. How much interest is accrued after the first month?

Answer 1

$90.12

Explanation:

The principal amount of the loan is ...

(sale price)(1 + sales tax rate) - (down payment)

= $19,725×1.0475 -2175 = $18,486.94

For a secured loan, the APR charged for an average credit rating appears to be 5.85%, so the interest for the first month is

i = Prt = ($18,486.94)(0.0585)(1/12)

i = $90.12