Question

Suppose you want to buy a new car that costs ​$32,200. You have no cash, only your old​ car, which is worth ​$4000 as a​ trade-in. The dealer says the interest rate is 5​% ​add-on for 3 years. Find the total interest.

A) ​$16,100
B) ​$8,000
C) ​$4,000
D) ​$2,020

Answer 1

To find the total interest on the car loan, the formula I = P * r * t is used. With a principal loan amount of $28,200, an interest rate of 5%, and a period of 3 years, the total interest adds up to $4,230. However, this answer does not match any of the options provided.

Step-by-step explanation:

The student is asking to calculate the total interest on a car loan with an add-on interest rate. To find the total interest on a loan, you can use the formula for add-on interest, which is I = P * r * t, where I is the total interest, P is the principal amount, r is the annual interest rate, and t is the time in years. In this case, the price of the new car is $32,200, and after trading in the old car worth $4,000, the loan amount (principal) becomes $32,200 - $4,000 = $28,200. With an interest rate of 5% (0.05) for 3 years, the total interest can be calculated as follows:

I = P * r * t

I = $28,200 * 0.05 * 3

I = $4,230

However, none of the given choices (A) $16,100, (B) $8,000, (C) $4,000, (D) $2,020 match the calculated interest of $4,230. There might be a mistake in the provided options or in the question itself.