You want to buy a 21000 car The company is offering a 63 int

You want to buy a $21,000 car. The company is offering a 6.3% 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) M = P(1+r)ⁿ r / [(1+r)ⁿ-1]

where P = the amount borrowed ;  r = the monthly interest rate ;

n = the number of months of the loan

M = the monthly payment

So, P = $21,000 ; r = 0.063/12 = 0.00525 ; n= 48

M = 21000(1 + 0.00525)^48*(0.00525)/(1.00525^48 -1)

= 141.75/0.2857

= $ 496.15

b) Interest = total payment - principal

= 496.15*48 - 21000

= $2815.20