E-Loan, an online lending service, recently offered 60-month auto loans at 6% compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of $296, how much can you borrow from E-Loan? What is the total interest you will pay for this loan?
Ans you borrow from E-Loan = $ 15310.77
total interest you will pay for this loan = $ 2449.23
| P = | Regular Payments |
| PV = | Loan Amount |
| r = | rate of interest |
| n = | no of periods |
| P = | r (PV) |
| 1 - (1 + r )^-n | |
| 296 = | (6%/12) *PV |
| 1 - (1 / (1 + 6%/12)^60)) | |
| 296 = | 0.005 * PV |
| 0.258627803755653 | |
| PV = | 296 / 0.005 * 0.258627803755653 |
| PV = | 15310.77 |
| Interest = | Total Amount paid - Loan amount |
| (296*60) - 15310.77 | |
| 2449.23 | |
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