Question

22. Chris bought a new car for $12,500. He made a $3,000 down payment and financed the rest at an annual interest rate of 14.5% for 36 months (3 years). How much less would his total interest be for the same loan for 24 months (2 years)? A. $1,387.50 B. $1,377.50 C. $1,367.50 D. $1,357.50​

Answer 1

Explanation:

Purchase price (A) : $12,500

Down Payment (B): $3,000

Loan Taken (C = A - B): $9500

D : Interest calculation for $9,500 for 3 years P(1 + rt)

= 9500(1 + (14.5/100) * 3)

= 9500(1 + 0.145 * 3)

= 9500 * 1.435

= $13632.5

E : Interest calculation for $9,500 for 2 years P(1 + rt)

= 9500(1 + (14.5/100) * 2)

= 9500(1 + 0.145 * 2)

= 9500 * 1.29

= $12,255

Difference between D - E

= $13632.5 - $12,255

= $1377.5

Hence the answer is B i.e. $1377.5 less interest for same amount of load for 2 years vs 3 years