Question

Lindsay needs to purchase a car. The car she is planning o in 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:
1. To purchase the car, what is the amount that Lindsay will need finance? (1
point)
2. In one year, how much interest will Lindsay pay on t his loan? (1 point)
2. 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

1. $6,000

2. $60

3. $8,180

Step-by-step explanation:

With the down payment equal to $2,000, amount Lindsay need finance to purchase car would be: $8,000 - $2,000 = $6,000

As Lindsay would pay for a term of 3 years

=> In each year, the amount finance is: $2,000

In one year, with APR = 3%, interest Lindsay has to pay on the loan of $2,000 is: $2,000 x 3% = $60

=> In three years, amount Lindsay pay for interest for the total finance is: $60 x 3 = $180

The actual cost of the car for Lindsay to own:

Actual cost = down payment + finance + interest = $2,000 + $6,000 + $180

= $8,180