Question

You purchase a car for $27,500 and put $2,500 as a down payment. What is your loan a mount? Calculate your P&1 at 5% interest for 4 years. How much P&l will you pay? Assuming you make 48 equal payments, what is yourmonthly payment?

Answer 1

Your loan amount after a $2,500 down payment on a $27,500 car would be $25,000. At a 5% interest rate for 4 years, you would pay a total of $5,000 in interest, making the total amount to be repaid $30,000.

Step-by-step explanation:

When you purchase a car for $27,500 and make a $2,500 down payment, your loan amount is the price of the car minus your down payment, which would be $25,000. Calculating your principal and interest (P&I) at a 5% interest rate for 4 years, we need to determine the total interest paid over the life of the loan and then find out the monthly payment.

To calculate the total interest paid, we can use the formula for the amortization of a loan which takes into account compound interest.

However, for simplicity, we can approximate the interest using simple interest here, which would be: Interest = Principal × Rate × Time = $25,000 × 0.05 × 4 = $5,000. This means the total amount to be repaid is $25,000 (principal) + $5,000 (interest) = $30,000. Dividing this amount by 48 months gives us a monthly payment of $625.