60.6k views
2 votes
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?

User Deniss
by
8.1k points

1 Answer

6 votes

Final answer:

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

User Arr Raj
by
8.3k points