You want to buy a 22000 car The company is offering a 79 int

You want to buy a $22,000 car. The company is offering a 7.9% interest rate for 4 years.
Round your answer to the nearest cent as needed.

a) What will your monthly payments be? $

b) How much interest will you pay over the entire loan period? $

Solution

a)      The formula for calculating EMIs ( equated monthly installments)is:

EMI = [P * r * (1+r)ⁿ]/[(1+R)ⁿ - 1], where P stands for the loan amount or principal, r is the interest rate per month and n is the number of monthly installments. Here, P = $ 22000, r = 7.9%/12 = 7.9/1200 =, and n = 4*12 = 48. Therefore, the monthly payment = [22000*7.9/1200* ( 1+7.9/1200)⁴⁸ ] / [ ( 1 +7.9/1200)⁴⁸ -1] = 144.833(1207.9/1200)⁴⁸ / [ (1207.9/1200)⁴⁸ – 1] = 144.833* (1.3702)/ ( 0.3702) = 198.4517/0.3702 = $ 536.07 ( on rounding off to the nearest cent).

b)      The total amount repaid to the company is $ 536.07*48 = $ 25731.36, so that the amount of interest paid is $ 25731.36 - $ 22000 = $ 3731.36.