Question

For the car loan described, give the following information.

A car dealer will sell you the $30,550 car of your dreams for $6,000 down and payments of $664.06 per month for 60 months.

(a) amount to be paid
$  

(b) amount of interest
$

(c) interest rate (Round your answer to two decimal places.)


(d) APR (rounded to the nearest tenth of a percent)

Answer 1

Given, Origination fee=$6000

Principal =$30550

Time=60 months =5 years

a) Amount to be paid=Origination fee + Total amount paid during 60 months

=$6000 + ($664.06 × 60)

=$6000 + $39843.6

=$45843.6

b)Amount of interest =Amount-Principal

=$45843.6 - $30550

=$15293.6

c)Interest rate=

(Amount of interest)/(Principal×Time) ×100%

=(15293.6)/30550×5) × 100% per year

[as time is in years, so rate is calculated per year]

=10.01 % per year

d) APR(annual percentage rate)=

(Origination fee+Amount of Interest)/(Principal×No. of years)×100%

=(6000+15293.6)/(30550×5) ×100%

=(21293.6/152750)×100%

=0.139 × 100%

=13.9 % [after rounding off to the nearest tenth]