I have a question here that I was told to clarify. So I'll try to.
Here's the question (its a 2 part question)
1) a) You purchase a new car for $16,725.00 plus 6.15% sales tax. The down payment is $1,400.00 and you have an average credit rating. How much interest is accrued after the first month?
Average Secured-5.85 Unsecured- 6.20
1) b) You purchase a new car for $16,725.00 plus 6.15% sales tax. The down payment is $1,400.00 and you have an average credit rating. If you improved your credit score to good and paid $2,100 on your purchase, how much interest could you save in the first month
Instead of posting the entire graph, I just took out the important part: the Average credit rating( both secured and unsecured.)
All I know about solving this is that we're supposed to use only ONE of the average ratings depending on what we're buying. Since its a car I think we're supposed to use the secured rating.
To calculate the interest accrued after the first month, we need to know the interest rate. In this case, since you have an average credit rating, we use the average secured rating, which is 5.85%.
First, let's calculate the total amount financed. It will be the purchase price of the car ($16,725.00) plus the sales tax (6.15% of $16,725.00). To find the sales tax, multiply the purchase price by the sales tax rate (0.0615).
Sales tax = $16,725.00 * 0.0615 = $1,028.84
Total amount financed = $16,725.00 + $1,028.84 = $17,753.84
Next, subtract the down payment ($1,400.00) from the total amount financed:
Principal = $17,753.84 - $1,400.00 = $16,353.84
To calculate the interest accrued after the first month, multiply the principal by the monthly interest rate. The monthly interest rate is the annual interest rate divided by 12, since we are looking at the first month.
Interest accrued = Principal * (Monthly interest rate / 100)
Interest accrued = $16,353.84 * (5.85 / 100)
Now, you can solve for the interest accrued after the first month.
For part 1b, we need to find out how much interest could be saved if you improved your credit score to good and paid $2,100 on your purchase.
First, calculate the new principal after the down payment:
New principal = Principal - $2,100.00
Then, calculate the new interest accrued using the new principal and the average secured rating for good credit (if provided). Follow the same steps as in part 1a to find the interest accrued after the first month.
Finally, subtract the interest accrued in part 1b from the interest accrued in part 1a to determine how much interest could be saved in the first month.
Remember, these calculations assume a simple interest calculation method. Additional factors such as compounding or any promotional interest rates should also be considered for a comprehensive analysis of the interest accrued.