Question

You want to buy a $32,000 car. The company is offering a 7.5% interest rate for 3 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 = $32,000

r is rate of interest in monthly basis.So, r = Rate of Annual interest/12/100

if its 7.5% annual ,then its 7.5/12/100=0.00625

n is tenture in number of months = 3 X12 = 36 months

substituting all the values in the given formula, we get

EMI = $995.40

Total value of the interest = (EMIX36) - P

(995.40*36)-32000

=$3834.4 of interest over the period of 3 years.