Question

Chapter 3 College Mathematics: Learning Worksheets Chapter 3 2. Emma makes a deal to pay $200 a month for 5 years on a car loan at 3.6% annual interest compounded monthly to pay for the car. a) What is the present value of the car? b) How much will Emma make in payments for the car? c) How much interest will she pay on the car loan?

Answer 1

a)Present Worth Factor (PWF)=(P/A,i,N)=(((1+i)^N)-1)/(i*((1+i)^N))

i=Monthly Interest Rate =(3.6/12)%=0.3%=0.003

N=5*12=60 (months)

PWF=(P/A,0.3%,60)=(((1+0.003)^60)-1)/(0.003*((1+0.003)^60))=54.8349

Present Value of the car=$200*PWF=200*54.8439=$10,967

b)Total Payment for the car =$200*60=$12,000

c) Total interest she will pay =Total Payment - Present Value of car =$12,000-$10,967=$1,033