16 You want to finance 28900 for a car Your bank offers you

16) You want to finance $28,900 for a car. Your bank offers you a 5 year loan at 2.75% interest. a. Find your monthly car payment (4 points) b. Find the total amoun of interest you will pay for the loan. (4 points)

Solution

Monthly rate = 2.75/ 12 = .22917%

number of months = 5*12 =60

A)monthly payment = Amount financed /PVA .22917%,60

            = 28900 /55.99785

            = $ 516.09 per month

**find present value annuity factor using financial calculator or from present value annuity table at .22917% for 60 periods

B)Total amount paid over 5 years = 516.09 * 60 = 30965.4

Interest paid = Total amount paid -amount financed

                    = 30965.4 -28900

                    = $ 2065.4