Question

You want to buy a $34,000 car. The company is offering a 8.1% interest rate for 5 years.
Round your answer to the nearest cent as needed.

a) What will your monthly payments be? $

b) How much interest will you pay over the entire loan period? $

Answer 1

The formula for the EMI is given by,

E = P×r×(1 + r)ⁿ/((1 + r)ⁿ - 1)

where P is Priniple Loan Amount = $34,000

r is rate of interest calualted in monthly basis it should be = Rate of Annual interest/12/100

if its 8.1% annual ,then its 8.1/12/100=0.00675

n is tenture in number of months = 5 X12 = 60 months

substituting all the values in the given formula, we get

EMI = $691.03

Total value of the interest = (EMIX60) - P

= 41461.8 - 34000

=$ 7461.8 of interest over the period of 5 years is the extra.