Final answer:
The total cost of the car after five years is approximately $20,778.50. Therefore, the correct answer is (a) $19,963.40.
Step-by-step explanation:
To find the total cost of the car after five years, we need to calculate the total amount of interest paid throughout the loan.
The principal amount of the loan is given by the difference between the cost of the car and the down payment:
P = $16,720 - $1,940 = $14,780
The interest rate on the loan is 8.1% per year, and the loan term is five years. Therefore, the total amount of interest paid throughout the loan is given by:
I = P * r * t
where r is the annual interest rate as a decimal, and t is the loan term in years. Substituting the given values, we get:
I = $14,780 * 0.081 * 5 = $5,998.50
Therefore, the total cost of the car after five years is given by the sum of the principal and the total interest paid:
Total cost = P + I = $14,780 + $5,998.50 = $20,778.50
Therefore, the correct answer is (a) $19,963.40.