234k views
0 votes
1. ANSWER THE FOLLOWING: YOU BUY A NEW HOT PINK VOLKSWAGON BEETLE CAR THAT COST $22,500. YOU HAVE $4,000 DOWN PAYMENT. THE BANK LOANS YOU THE MONEY AT 6% INTEREST. YOU DECIDE TO PAY MONTHLY PAYMENTS FOR 4 YEARS. HOW MUCH INTEREST DO YOU OWE THE BANK FOR BORROWING THE MONEY? HOW MUCH WILL IT COST FOR THE CAR PER MONTH PAID OVER 4 years

User Ooransoy
by
6.0k points

1 Answer

4 votes

The total amount borrowed is $22,500 - $4,000 = $18,500.

To calculate the total interest, we need to first calculate the total amount of payments over 4 years. There are 12 months in a year, so the total number of payments will be 12 x 4 = 48 payments.

To calculate the monthly payment, we can use the formula for a fixed-payment loan:

Monthly payment = [P x r x (1 + r)^n] / [(1 + r)^n - 1]

where P is the principal (amount borrowed), r is the monthly interest rate, and n is the total number of payments.

The monthly interest rate is 6% / 12 = 0.005.

Monthly payment = [18500 x 0.005 x (1 + 0.005)^48] / [(1 + 0.005)^48 - 1] = $430.87 (rounded to the nearest cent)

The total amount paid over 4 years is $430.87 x 48 = $20,666.62.

The total interest paid is $20,666.62 - $18,500 = $2,166.62.

Therefore, the interest owed to the bank for borrowing the money is $2,166.62.

The cost of the car per month paid over 4 years is $430.87.

User Seaux
by
7.3k points