Question

Lindsay needs to purchase a car. The car she is planning on purchasing costs $8,000 and she has $2,000 that she will be using as a down payment. She is offered credit terms of 3% APR for a term of 3 years. Please calculate the following:

To purchase the car, what is the amount that Lindsay will need finance? (1 point)
In one year, how much interest will Lindsay pay on this loan? (1 point)
After three years, in order for Lindsay to OWN the car, what will the actual cost of the car be in dollars? (3 points)
(down payment+amount financed+interest=actual cost of car)

Answer 1

Lindsay will have to take a loan of 6000$, with annual interest after first year of 180$ and actual cost of the car equal to 8180$

Step-by-step explanation:

Since Lindsay already has 2000$ as a down payment, which is initial up-front payment for purchases of expensive goods, like car or a house, she would need only 6000$ more in form of the loan. Since the annual interest rate is 3%, after one year her annual interest in absolute value would be 6000*0.03= 180$. Therefore, total cost for purchasing of a car is 2000+6000+180=8180$