Question

Fritz Benjamin buys a car costing $24600. He agrees to make payments at the end

of each monthly period for 6 years. He pays 7.2% interest, compounded monthly.
What is the amount of each payment? Find the total amount of interest Fritz will
pay.

Answer 1

$525.62

$13,244.64

Explanation:

A = P(1 + r/n)^nt

Where,

A = future value = ?

P = principal = $24,600

r = interest rate = 7.2% = 0.072

n = number of periods = 12

t = time = 6 years

A = P(1 + r/n)^nt

= 24,600(1 + 0.072/12)^12*6

= 24,600(1 + 0.006)^72

= 24,600(1.006)^72

= 24,600(1.5384)

= 37,844.64

12 months × 6 years = 72 months

Each monthly payment = Total payment / number of months

= $37,844.64 / 72

= $525.62

Total amount of interest = Total payment - Principal payment

= $37,844.64 - $24,600

= $13,244.64