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Del bought a new car for $38,000 with a loan that will be amortized over five years
Del bought a new car for $38,000 with a loan that will be amortized over five years. The best interest rate he got from his bank for the loan was 2.0 percent compounded annually. What is Del’s monthly car payment? How much interest was paid in the first car payment? How much interest will be paid over the entire life of the car loan? [6 pts] (Show your calculations)
Please show using EMI formula EMI = [P * R * (1+R) ^ N]/[(1+R) ^ N-1]
Expert Solution
rate compounded monthly=((1+2%)^(1/12)-1)*12=1.9819%
=>R=1.9819%/12=0.1652%
N=12*5=60
P=38000
Monthly car payment=38000*(0.1652%)*(1+0.1652%)^60/((1+0.1652%)^60-1)=665.75
Interest in first car payment=Loan*R=38000*0.1652%=62.78
Total interest paid=Monthly payments*N-Loan=665.75*60-38000=1945.00
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