Question

Terry has just purchased a new car, which had a list price of $16,825. She had to pay 7. 19% sales tax, a $1,128 vehicle registration fee, and a $190 documentation fee. Terry traded in her previous vehicle, a 2003 Honda Element in good condition to use as a downpayment. The dealer paid full price for her trade in. She financed the rest of the cost over five years at an interest rate of 10. 59%, compounded monthly. What is her principal payment per month? (Round all dollar values to the nearest cent. ) Honda Cars in Good Condition Model/Year 2000 2001 2002 2003 Element $5,887 $6,080 $6,225 $6,622 Odyssey $8,450 $8,693 $8,928 $9,224 Insight $4,384 $4,661 $5,006 $5,440 Accord $6,356 $6,626 $6,817 $7,114 a. $416. 83 b. $190. 00 c. $218. 16 d. $274. 20.

Answer 1

The principal payment per month of the loan will be $190.00 approximately.

The answer is calculated by not giving effect to the interest amount for 5 years.

How to calculate principal per month?

The principal per month refers to the original amount borrowed divided by the number of months for which the amount is borrowed. The formula therefore to calculate principal per month will be:

$\rm Principal\:per\:month = \dfrac{\rm Amount\: borrowed}{Number\:of\:month}$

For the given question, the principal per month will be calculated as follows:

$\begin{aligned} \rm Price\:of\:car &= List\:price + Sales\:tax\\\\&= \ 16,825 + 7.19\%\\\\&= \ 18,034.72\end$

The principal borrowed will be list price less downpayment of the car.

$\begin{aligned} \rm Principal\:borrowed &= \rm Price - Downpayment\\\\&= \ 18,034.72 - \ 6,662\\\\&=\ 11,412.72\end$

Therefore, principal per month will be:

$\begin{aligned}\rm Principal\:per\:month &= \dfrac{11,412.72}{5 \times 12}\\\\&= \dfrac{11,412.72}{60}\\\\\\&= \ 190.2\end$

Therefore, the principal per month will be $190(approximately).

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