Question

The cash price of a car was $64000. Edward paid a down payment of $16000 and the remaining balance by making 60 equal monthly installments of $940. Calculate

a) The extra cost he had to pay in total
b) The interest rate per year charged​

Answer 1

((1)) - The EXTRA COST EDWARD had to PAY in TOTAL is: $8400

((2)) - The INTEREST RATE PER YEAR charged is: 3.5%

Explanation:

• MAKE A PLAN:
  Calculate the TOTAL AMOUNT EDWARD PAID and the EXTRA COST he had to PAY.

Then, FIND the INTEREST RATE PER YEAR CHARGED.

• SOLVE THE PROBLEM:

((A)) - CALCULATE the TOTAL AMOUNT EDWARD PAID:

• ((1)) - DOWN PAYMENT:

16000

• ((2)) - MONTHLY INSTALLMENTS:

60 * 940 = 56400

• ((3)) - TOTAL AMOUNT PAID:

16000 + 56400 = 72400

• ((4)) - CALCULATE THE EXTRA COST:

EXTRA COST = TOTAL AMOUNT PAID - CASH PRICE

EXTRA COST = 72400 - 64000

= 8400

• ((B)) - CALCULATE THE INTEREST RATE PER YEAR CHARGED:

• ((1)) - REMAINING BALANCE:

64000 - 16000 = 48000

• ((2)) - TOTAL INTEREST PAID:

8400

• ((3)) - INTEREST PAID PER YEAR:

8400 / 5 (Since there are 60 monthly installments, which is Five (5) years.).

• INTEREST PAID PER YEAR:

1680

• ((4)) - CALCULATE THE INTEREST RATE PER YEAR:

INTEREST RATE PER YEAR = (INTEREST PAID PER YEAR / REMAINING BALANCE ) * 100

INTEREST RATE PER YEAR = (1680 / 48000 ) * 100

= 3.5%

• DRAW THE CONCLUSION:

((1)) - The EXTRA COST EDWARD had to PAY in TOTAL is: $8400

((2)) - The INTEREST RATE PER YEAR charged is: 3.5%

I hope this helps you!