Question

Bawy borrowed $10,000 to purchase a new car at an annual interest rate of 115. She is to pay it back in equal monthly payments over a year period. How much total interest will be paid over the period of the ban? Hound to the nearest dollar OA $1436 OB. 30 OC 02 OD 63045

Answer 1

annual interest rate = 11%

payment period = monthly

rate per period = 11 /12 = 0.916667%

number of periods = 5 years x 12 months = 60

loan amount = $10,000 (present value)

first we need to find out monthly installments using present value of annuity formula

present value of annuity = P[ 1 - (1 + r)^-n / r ]

where P = monthly payments

r = rate of interest per period

n = number of periods

10,000 = P [ 1 - (1 + 0.916667%)^-60 / 0.916667% ]

so P = 217.4242

total amount paid = monthly payments x number of periods

=217.4242 x 60

= 13,045(rounded to nearest dollar)

interest = total amount paid - borrowed amount

= 13,045 - 10,000

= $3045

Option D is correct answer