Question

3. Monthly Car Payment: The Mills' purchased a new car for $29,575. The tax on thevehicle was 3.25% and title and license fees were $210. They were able to get a trade-in of$4,500 on Jackson's old car. If they financed the remainder at 5.25% for 5 years, what wasthe monthly payment on the car loan?Select the correct answer for each dropdown menu.A. Total Purchase Price (including taxes and fees): [Select]B. Loan Amount (with down payment): (Select]C. Interest on Loan: [Select]D. Amount to be repaid: [Select]Select)E. Amount of each payment:

Answer 1

From the question;

Purchase price = $29,575

Tax = 3.25%

License fee = $210

A. We are to calculate the total purchase price

$\begin{gathered} \text{Total Purchase price = \ 29,575 + 3.25\% 0f \ 29,575 + \ 210} \\ \text{Total purchase price = \ 29,575 + \ 961.19 + \ 210} \\ \text{Total purchase price = \ 30,746.19} \end{gathered}$

Therefore,

Total Purchase price = $30,746.19

B. Loan amount

$\text{Loan amount = Total purchase - trade-in payment}$

Trade-in payment = $4,500

Therefore,

$\begin{gathered} \text{Loan amount = \ 30,746.19 - \ 4,500} \\ \text{Loan amount = \ 26,246.19} \end{gathered}$

Therefore,

Loan Amount = $26,246.19

C. Interest on loan

$\text{Interest = }\frac{P\times R\times T}{100}$

From the question

P = Loan amount =$26,246.19

R = 5.25

T = 5years

Therefore,

$\begin{gathered} \text{Interest = }\frac{\text{\ 26,264.19 }\times\text{5.25 }\times5}{100} \\ \text{Interest =}\frac{\text{\ 688,957.5}}{100} \\ \text{Interest = \ 6,889.6} \end{gathered}$

Therefore,

Interest on loan = $6,889.6

D. Amount to be repaid

$\begin{gathered} \text{Amount = Loan amount + Interest} \\ \text{Amount = \ 26,246.19 + \ 6,889.6} \\ \text{Amount = \ 33,135.8} \end{gathered}$

Therefore,

Amount to be repaid = $33,135.8

E. Amount of each repayment

since the repayment is on a monthly basis

$\begin{gathered} \text{The loan is for 5 years} \\ \text{Hence, } \\ T\text{otal months = 5 }\times12\text{ months} \\ T\text{otal months = 60 months} \end{gathered}$

Therefore,

$\begin{gathered} \text{Amount of each payment = }\frac{Amount\text{ to be repaid }}{Total\text{ months}} \\ \text{Amount of each payment = }\frac{\text{\ 33,135.8}}{60} \\ \text{Amount of each payment = \ 552.3} \end{gathered}$

Therefore,

Amount of each payment = $552.3