Homework Help: finance

Posted by tina on Monday, January 31, 2011 at 7:21am.

Richard likes the car price of $10,000 but financing through the dealer is no bargain.He has $2,000 for a down payment,so he needs $8,000 for the loan.Richard borrows $8000 for a period of four years at an add on intrest rate of 11 %.What is the total intrest on the loan?What is the total cost on the car?What is the monthly payment?what is the apr?

finance - helper, Monday, January 31, 2011 at 11:25am
$8000 add on interest rate of 11%

8000 x .11 = 880 add on interest/yr
880/yr x 4/yrs = 3520
3520/2 = 1760

1760 total interest on loan
1760 add on interest added to principal

8000 principal + 1760 towards principal
= 9760 total loan principal

9760/48 mo = 203.33/month payment

APR % = (APR x no. yrs)/2
APR % = (11 x 4)/2 = 44/2 = 22%

Total car cost
8000 orig loan
1760 add on interest towards principal
1760 loan interest
11520 sub total
2000 down payment
13520 total cost of car

1760 interest/8000 loan = .22 = 22% APR

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