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2) You are interested in buying a car that costs $10,000. The bank offers you an installment loan

with an interest rate of 17% over a 60-month term. What do you expect your monthly payment
to be? How much will you pay in total? How much will you pay in interest?

User Typedfern
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1 Answer

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Answer:

the expected monthly payment is approximately $212.47, the total payment over the 60-month term is $12,748.20, and the total interest paid is $2,748.20.

Explanation:

To calculate the monthly payment, total payment, and interest paid for an installment loan, we can use the loan payment formula:

Monthly Payment = P * (r * (1 + r)^n) / ((1 + r)^n - 1)

Where:

P = Principal amount (loan amount)

r = Monthly interest rate (annual interest rate divided by 12)

n = Total number of months

Given:

Principal amount (loan amount) = $10,000

Annual interest rate = 17%

Loan term = 60 months

First, we need to calculate the monthly interest rate and the total number of months:

Monthly interest rate = Annual interest rate / 12

r = 17% / 12 = 0.017 / 12 = 0.0014167

Total number of months = Loan term = 60 months

n = 60

Now, we can calculate the monthly payment using the loan payment formula:

Monthly Payment = $10,000 * (0.0014167 * (1 + 0.0014167)^60) / ((1 + 0.0014167)^60 - 1)

Using a calculator or spreadsheet software, the monthly payment comes out to be approximately $212.47.

To calculate the total payment, we can multiply the monthly payment by the total number of months:

Total Payment = Monthly Payment * Total number of months

Total Payment = $212.47 * 60

Total Payment = $12,748.20

To calculate the interest paid, we can subtract the principal amount from the total payment:

Interest Paid = Total Payment - Principal amount

Interest Paid = $12,748.20 - $10,000

Interest Paid = $2,748.20

Therefore, the expected monthly payment is approximately $212.47, the total payment over the 60-month term is $12,748.20, and the total interest paid is $2,748.20.

User Tariq Saeed
by
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