Question

1You are looking to purchase a motorcycle and would like to get a Harley Davidson Softail Deluxe. You find one that you like for $18,399. You have $5,000 to put down and based on your credit score you are told that your APR will by 5% for an 8 year loan. a. Calculate the principal for the loan. b. Calculate the finance charges. c. Find the Total Loan Amount d. What is the monthly payment on the loan?

Answer 1

The principal for the loan is $13,399. The finance charges amount to $5,359.60. The monthly payment on the loan is $193.17.

Step-by-step explanation:

To calculate the principal of the loan, subtract the down payment from the price of the motorcycle. In this case, the principal would be $18,399 - $5,000 = $13,399.

To calculate the finance charges, multiply the principal by the APR and the loan term. The finance charges would be $13,399 * 0.05 * 8 = $5,359.60.

To find the total loan amount, add the principal and the finance charges. The total loan amount would be $13,399 + $5,359.60 = $18,758.60.

To calculate the monthly payment on the loan, use the formula:

Monthly Payment = (Principal * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Payments))

In this case, the monthly interest rate would be (5% / 12) / 100 = 0.00417, and the number of payments would be 8 * 12 = 96.

Substituting these values into the formula, the monthly payment would be:

Monthly Payment = ($13,399 * 0.00417) / (1 - (1 + 0.00417)^(-96)) = $193.17