Question

Your friend just got a five-year car loan for $40,000 with 6%
interest rate (APR) and monthly

payments. You explained to her that 6% is too high, and she could
have saved a lot of money if she

negotiated with the bank and got 3% instead. How much money would
your friend have saved every

month if the rate was 3% instead of 6%?

Answer #1

EMI is computed as,

Where, P = Principal

i = interest rate per period

n = Number of compunding periods

**Case 1 - 6%
Interest**

APR = 6%

So, monthly interest 0.06/12 = **0.005** or
0.5%

So, total Payment = 773.31 * 60 Payment =
**$46,398.72**

**Case 1 - 6%
Interest**

APR = 3%

So, monthly interest 0.03/12 = **0.0025** or
0.25%

So, total Payment = 718.75 * 60 Payment =
**$43,124.86**

**Savings made = 46,398.72 - 43,124.86 =
$3,273.86**

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