Question

Use your financial calculator to compute the monthly payments for a vehicle that costs ​$13,100 if you financed the entire purchase over four years at an annual interest rate of 6.5 percent. Also calculate the loan payments assuming rates of 5.5 percent and 7.5 percent. Compare the total amount spent on the vehicle under each assumption.

The monthly payments for a vehicle that costs ​$13,100 if you financed the entire purchase over four years at an annual interest rate of 6.5 percent is $

Answer 1

Loan Amount = $13,100

Time Period = 4 years = 48 months

If, Interest Rate = 6.5%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 13100, FV = 0, T = 48, I = 0.065/12]

PMT = $310.67

Monthly Payment = $310.67

Total Amount Paid = 48(310.67) = $14,912.16

If, Interest Rate = 5.5%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 13100, FV = 0, T = 48, I = 0.055/12]

PMT = $304.66

Monthly Payment = $304.66

Total Amount Paid = 48(304.66) = $14,623.68

If, Interest Rate = 7.5%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 13100, FV = 0, T = 48, I = 0.075/12]

PMT = $316.74

Monthly Payment = $316.74

Total Amount Paid = 48(316.74) = $15,203.52