Question

​E-Loan, an online lending​ service, recently offered 60​-month auto loans at

4.5 %compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of

$ 511 how much can you borrow from​ E-Loan? What is the total interest you will pay for this​ loan?

Answer 1

Monthly Payment = $511
Number of Payments = 60

Annual Interest Rate = 4.50%
Monthly Interest Rate = 4.50% / 12
Monthly Interest Rate = 0.375%

Amount Borrowed = $511/1.00375 + $511/1.00375^2 + … + $511/1.00375^59 + $511/1.00375^60
Amount Borrowed = $511 * (1 - (1/1.00375)^60) / 0.00375
Amount Borrowed = $511 * 53.639380
Amount Borrowed = $27,409.72 or $27,410

Total Amount Paid = $511 * 60
Total Amount Paid = $30,660

Total Interest Paid = $30,660 - $27,410
Total Interest Paid = $3,250