Question

To purchase a new car, you borrow $20,000. The bank offers a 6-year loan at an interest rate of 3.25% compounded annually. If you make only one payment at the end of the loan period, repaying the principal and interest: Which time value factor should be used to solve this problem?

Answer 1

SPCA factor

Single payment compound amount factor.

Total amount pay A = $24,230.95 (Approx)

Interest paid = $4,230.95 (Approx)

Step-by-step explanation:

Given:

P = $20,000

n = 6 year

r = 3.25%

Find:

Total amount pay A

Computation:

A=p(1+r)ⁿ

A=20,000[1+3.5%]⁶

A=20,000[(1.0325)⁶]

Total amount pay A = $24,230.95 (Approx)

Interest paid = $24,230.95 - 20,000

Interest paid = $4,230.95 (Approx)