Question

Select the correct answer.

Suppose Jared makes a down payment to obtain a loan for a new car. Which statement is true?


Interest charged for the loan will be calculated based on the price of the car minus the down payment.

Interest charged for the loan will be calculated based on the price of the car plus the down payment.

Jared won’t be charged interest on the loan because he made a down payment.

Interest charged for the loan will be calculated based on the price of the car, regardless of the down payment.

Answer 1

(a) Interest charged for the loan will be calculated based on the price of the car minus the down payment.

Explanation:

You want to know how interest is charged if Jared makes a down payment to obtain a loan for a new car.

Interest charges

The interest on a loan is charged based on the value of the outstanding balance. The loan amount will be for the remaining price of the car after the down payment has been applied to the purchase.

Interest charged for the loan will be calculated based on the price of the car minus the down payment, choice A.

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