Final answer:
The total cost of the car, including interest, at the end of the 5 years is $6,550. To calculate the total cost of the car including interest at the end of the 5 years, we first need to consider the initial down payment and then calculate the total amount of interest paid on the loan.
Step-by-step explanation:
To calculate the total cost of the car, we need to add the down payment to the total interest paid over the 5 years. Firstly, let's calculate the interest. The yearly interest is $28,000 x 0.0325 = $910. Over 5 years, the total interest is $910 x 5 = $4,550. So, the total cost of the car is $2,000 (down payment) + $4,550 (interest) = $6,550.
To determine the total cost of the car including interest, add the $2,000 down payment to the future value of the $28,000 loan compounded annually at 3.25% interest rate over 5 years. The future value is found using the compound interest formula. The final total will include the down payment and the compounded interest on the loan.
To calculate the total cost of the car including interest at the end of the 5 years, we first need to consider the initial down payment and then calculate the total amount of interest paid on the loan. The down payment is $2,000. The remaining amount of the car, $28,000, is taken as a loan at a 3.25% annual interest rate for 5 years.
Since the type of interest (simple or compound) is not specified, we will assume compound interest, which is more common for loans. The formula for the compound interest is A = P (1 + r/n)^(nt) where:
A is the future value of the loan including interest
P is the principal amount ($28,000)
r is the annual interest rate (0.0325)
n is the number of times that interest is compounded per year
t is the time the money is invested for in years (5)
If we assume that interest is compounded once a year (n = 1), the formula simplifies to:
A = 28000 (1 + 0.0325)^5
We calculate this to find the future value of the loan A.
After calculating A, we add it to the down payment to get the total cost of the car over the 5 years.