<u>Answer:</u>
You want to buy a $33,000 car. The monthly payments is $ 605
Most car loans use simple interest, a type of interest of which the interest charge is calculated only on the principal
<u>Solution:</u>
Price of the car as mentioned in the question is equal to $33,000
Given rate of simple interest is equal to 2%,
Given time interval is equal to 60 months i.e., 5 Years
Most car loans use simple interest. Hence we can use simple interest formula to calculate the monthly payment
The formula of simple Interest is given as
![S . I=\frac{P \times R \times T}{100}](https://tex.z-dn.net/?f=S%20.%20I%3D%5Cfrac%7BP%20%5Ctimes%20R%20%5Ctimes%20T%7D%7B100%7D)
Where: P = Principal Amount
R = Rate
T = Time Interval
Thus, substituting the values we get
![S . I .=\frac{33000 \times 2 \times 5}{100}](https://tex.z-dn.net/?f=S%20.%20I%20.%3D%5Cfrac%7B33000%20%5Ctimes%202%20%5Ctimes%205%7D%7B100%7D)
![=\frac{33000}{10}=3300](https://tex.z-dn.net/?f=%3D%5Cfrac%7B33000%7D%7B10%7D%3D3300)
Therefore, total amount = Cost of the car + Interest = 33,000 + 3,300 = 36,300
Number of months for which instalment have to be paid is equal to 60 months i.e., 5 years
Thus, monthly payment to be given as instalment would be equal to
![=\frac{\text {total Amount}}{\text {time Period}}=\frac{36300}{60}=605](https://tex.z-dn.net/?f=%3D%5Cfrac%7B%5Ctext%20%7Btotal%20Amount%7D%7D%7B%5Ctext%20%7Btime%20Period%7D%7D%3D%5Cfrac%7B36300%7D%7B60%7D%3D605)
Thus the monthly payments is $ 605