Question

Farrah borrows $18,000 to purchase a new car. The annual interest rate for the 60-month loan is 4.3%.If she makes all the monthly payments, what is the total amount of interest she will pay on the loan?

Answer 1

Step 1:

In this question, we are given the following:

Principal = $ 18,000

Time = 60 month = 60/ 12 = 5 years

Interest = 4. 3%

Step 2:

The total amount she will pay at the end of the 5 -year period is given as follows:

`\begin{gathered} A\text{ = P ( 1 + }(R)/(100))^t \\ A\text{ = 18000 ( 1 + }(4.3)/(100))^5 \\ \end{gathered}`
`\begin{gathered} A\text{ = 22,217. 4416} \\ A\text{ }\approx\text{ }22,217.44\text{ dollars} \end{gathered}`

Step 3:

Now, we have that the amount = 22, 217. 44 dollars.

And the Principal = 18,000 dollars

If she makes all the monthly payments,

Then, the total amount of interest she will pay on the loan is:

`22,\text{ 217. 44 - 18,000 = 4,217. 44 dollars}`

CONCLUSION:

The total amount of interest she will pay on the loan = 4, 217. 44 dollars.