Question

A car costs $25,000 plus #675 for tax, title, and license fees. Ari finances the car by putting down $2,500 in cash and taking out a 3-year loan at 4% simple interest. What will his monthly payments be?

$721.00
$669.50
$650.00
$640.00
$722.50

Answer 1

The monthly payment for the financed car after a down payment of $2,500 on a 3-year loan with a 4% interest rate is $721.00.

Step-by-step explanation:

A student has asked about calculating the monthly payments for a car loan. The total cost of the car is $25,000 plus an additional $675 for tax, title, and license fees, summing up to $25,675. After making a down payment of $2,500, the amount financed is $23,175. This loan is to be paid off over 3 years (36 months) with a simple interest rate of 4%. To find the monthly payments, we first need to calculate the total interest on the loan, and then add this to the principal amount to find the total amount to be repaid, which is then divided by the number of months to get the monthly payment.

First, calculate the interest: I = P * r * t = $23,175 * 0.04 * 3. The interest will be $2,781, adding this to the principal gives us $23,175 + $2,781 = $25,956. Now, we divide this total by the number of months: $25,956 / 36 = $721. The correct monthly payment is $721.00.