Question

Mr. Nelson bought a car for $20,000 with a 5% interest rate.

Answer 1

Answer:

A ) Hence The interest for the car loan is $ 4,310

B ) Hence The interest for the car loan is $ 3,152

Step-by-step explanation:

Given as :

The loan for the car = $ 20,000

The rate of interest of car loan = 5 % compounded annually

A ) The period of loan = 48 months = 4 years

Let the interest of the loan = CI

From compounded method

Amount = Principal × $(1 + \frac{\textrm Rate}{100})^{\textrm time}$

Or, Amount = $ 20,000 × $(1 + \frac{\textrm 5}{100})^{\textrm 4}$

Or,  Amount = $ 20,000 × $(1.05)^{4}$

Or, Amount = $ 20,000 × 1.2155

∴ Amount = $ 24310

So, Interest = Amount - Principal

Or, CI = $ 24,310 - $ 20,000  

∴  CI = $ 4,310

Hence The interest for the car loan is $ 4,310

B ) The loan for the car = $ 20,000

The rate of interest of car loan = 5 % compounded annually

The period of loan = 3 years

Let the interest of the loan = CI

So,

From compounded method

Amount = Principal × $(1 + \frac{\textrm Rate}{100})^{\textrm time}$

Or, Amount = $ 20,000 × $(1 + \frac{\textrm 5}{100})^{\textrm 3}$

Or,  Amount = $ 20,000 × $(1.05)^{3}$

Or, Amount = $ 20,000 × 1.1576

∴ Amount = $ 23,152

So, Interest = Amount - Principal

Or, CI = $ 23,152 - $ 20,000  

∴  CI = $ 3,152

Hence The interest for the car loan is $ 3,152