Explanation Given: Cost of the used car that Scott Frei buys is $ 6 , 200 . Down payment required is $ 200 . Loan offered by the used car dealer is a f o u r - y e a r add-on interest loan having annual interest rate 9.9 % with an APR of 10 % . Approach: In an add-on interest loan, Interest for the entire term is calculated as, I = P r t with P as loan amount, r as annual interest rate and t is time period. Amount to be repaid is calculated as, P + I . Monthly payment p y m t is obtained by dividing total amount to be repaid by number of payments. Calculation: Here, P = $ 6 , 200 − $ 200 = $ 6 , 000 r = 9 To determine (b) To verify: The APR .

8th Edition

ISBN: 9781305104174

Author: David B. Johnson, Thomas A. Mowry

Publisher: Cengage Learning

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Question

Chapter 5.CR, Problem 39CR

To determine

(a)

To find:

The monthly payment.

To determine

(b)

To verify:

The APR.

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Chapter 5.CR, Problem 38CR

Chapter 5.CR, Problem 40CR

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(a) To find: The monthly payment.

Solution Summary: The author calculates the monthly payment by dividing the total amount to be repaid by number of payments. The given APR does not verify.