Question

You want to buy a $33,000 car. The company is offering a 2% interest rate for 60 months (5 years). What will your monthly payments be?

Answer 1

answer: $660 per month (w/ the interest rate)

33000×0.02= 660

Answer 2

Answer:

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

Solution:

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

$S . I=\frac{P \times R \times T}{100}$

Where: P = Principal Amount  

R = Rate

T = Time Interval  

Thus, substituting the values we get

$S . I .=\frac{33000 \times 2 \times 5}{100}$

$=\frac{33000}{10}=3300$

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  

$=\frac{\text {total Amount}}{\text {time Period}}=\frac{36300}{60}=605$

Thus the monthly payments is $ 605