Question

You have negioated a vehcile purchase rice of $37,000, will make a $7,000 down payment and finance the remainder. The terms of the loan are: monthly payments, 6.00 percent annual rate of interest, and you will finance the loan for six years.

a. calculate the amount of your monthly payments

b. at the end of the six-year loan term, what is the total amount of interest you will have paid the lenders?

Answer 1

a. To calculate the amount of your monthly payments, you can use the following formula:

P = (A / N) + (r * (A - ((A * (m - 1)) / N)))

Where:
P = monthly payment
A = total amount financed (purchase price - down payment)
N = total number of payments (6 years * 12 months = 72)
r = monthly interest rate (6% / 12 = 0.005)
m = the month of the payment (ranging from 1 to 72)

Plugging in the values, we get:

P = (30000 / 72) + (0.005 * (30000 - ((30000 * (1 - 1)) / 72)))
P = $483.23

So your monthly payment would be $483.23.

b. To calculate the total amount of interest paid over the six-year loan term, you can use the following formula:

Total Interest = (P * N) - A

Where:
P = monthly payment (from part a)
N = total number of payments (72)
A = total amount financed (30000)

Plugging in the values, we get:

Total Interest = (483.23 * 72) - 30000
Total Interest = $8,869.56

So the total amount of interest you will have paid the lenders over the six-year loan term is $8,869.56.