Question

One of the largest automobile dealers in the city advertises a 3-year-old car for sale as follows: Cash price $3575, or a down payment of $375 with 45 monthly payments of $93.41. Susan DeVaux bought the car and made a down payment of $800. The dealer charged her the same interest rate used in his advertised offer. How much will Susan pay each month for 45 months? What effective interest rate is being charged?

Answer 1

Answer:

1. monthly payment = $81
2. interest rate = 15%

Explanation:

You can use a loan calculator to determine the the effective interest rate of the loan:

• loan's principal = $3,575 - $375 = $3,200
• number of monthly payments = 45 or 3.75 years
• monthly payment = $93.41

interest rate = 15%

Now we can calculate Susan's monthly payment:

• loan's principal = $3,575 - $800 = $2,775
• number of monthly payments = 45 or 3.75 years
• interest rate = 15%

monthly payment = $81