Craig just purchased a new car. He financed $45,000 and must pay it back over 5 years with 11% interest.
Part A) How much will Craig have paid in interest by the time his car is paid off?
Part B) How much will he have paid for his car, including interest, after 5 years?
Part A) To calculate the amount of interest Craig will pay over 5 years, we first need to find the total amount of interest paid each year. The formula to calculate the interest paid in a year is:
Interest paid = Principal amount x Interest rate
Interest paid = $45,000 x 0.11 = $4,950 per year
Therefore, over 5 years, the total interest paid will be:
Total interest paid = $4,950 x 5 = $24,750
Part B) To find out how much Craig will have paid for his car, including interest, after 5 years, we need to add the total amount of interest paid to the principal amount of the loan:
Total amount paid = Principal amount + Total interest paid
Total amount paid = $45,000 + $24,750 = $69,750
Therefore, Craig will have paid $69,750 for his car, including interest, after 5 years.