Question

Question 9 (5 points)

You are taking out a loan of $15,000 for a new car, and you are given 2 options
Bank A - 7.2% for 3 years
Bank B - 8.1% for 5 years
What is the total interest paid for Bank B (Bank profit)?
$
Blank 1:

Answer 1

9514 1404 393

Answer:

$3291.60

Explanation:

If the loan is amortized in the usual way, the monthly payment is ...

A = P(r/12)/(1 -(1 +r/12)^(-12t)) . . . . . loan of P at rate r for t years

A = $15,000(0.081/12)/(1 -(1 +0.081/12)^(-12·5)) ≈ $304.86

The total of payments is ...

(60 months) × ($304.86/month) = $18,291.60

Then the profit to the bank is ...

$18,291.60 -15,000 = $3,291.60 . . . bank profit