John has decided that he wants a newer car. So, he headed to the dealership, and rather than purchasing a model with 0% interest, the salesman encourages him to look at some of the new model year vehicles, with the statement, “With the 5.9% interest, it’s just pennies more a day.” John decides to purchase one of the newer model year vehicles. The increased cost is within $1000 of the old model year, so why not? His total purchase price ended up being $28998, including tax, tag, and title. He decided on a 5 year loan, and the interest is compounded daily.
3. How much will he pay throughout the life of the loan?
P = Po(1+r)^n.
Po = $28,998.
r = (5.9%/360) / 100% = 0.00016389 = daily % rate expressed as a decimal.
n = 360Comp./yr * 5yrs = 1800 Compounding periods.
Plug the above values in the given Eq.
Answer: 38,789.99.