Question

Anna Conda purchased a new Toyota Tundra pickup truck for $35,000 and financed $33,000 with a 5 year, 4% loan. What is total finance or interest cost associated with the loan?

Answer 1

Given that,

Anna Conda purchased a new Toyota Tundra pickup for $35000

loan amount PV = $33000

term period t = 5 years

interest rate r = 4% compounded monthly

So, monthly loan payment for the loan is calculated using PV formula of an ordinary annuity.

Monthly payment PMT = PV*(r/n)/(1 - (1+r/n)^(-n*t)) = 33000*(0.04/12)/(1 - (1+0.04/12)^(-12*5)) = $607.75

So, Monthly payment for the loan = $607.75

So, total amount paid = monthly payment*total number of months = 607.75*12*5 = $36464.71

So, interest paid on loan = Total amount paid - loan amount = 36464.71 - 33000 = $3464.71