Question

​E-Loan, an online lending​ service, recently offered 48​-month auto loans at 4.5 % compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of $ 448​, how much can you borrow from​ E-Loan? What is the total interest you will pay for this​ loan?

Answer 1

Therefore I can borrow $19646.12 from E-Loan.

The interest I will pay for the loan is $1,857.88.

Step-by-step explanation:

The formula of present value is

`PV=PMT((1-(1+i)^(-n))/(i))`

PMT = The monthly payment = $448

i= Rate of interest per period
`=(4.5)/(12)\%=0.00375`

n = The number of month = 48 months

Therefore

`PV=448((1-(1+0.00375)^(-48))/(0.00375))`

≈$19646.12

Therefore I can borrow $19646.12 from E-Loan.

The interest = Paid amount - Loan amount

=$[(448×48)-19646.12]

=$1,857.88

The interest I will pay for the loan is $1,857.88.