The car payment plan that has an APR of 1.9% is, on the short term, pocket
friendly.
The correct responses are;
- First part: The amount of loan Molly needs is <u>$22,495</u>
- Second part: Molly's monthly payment will be approximately <u>$286.2</u>
- Third part: The total interest Molly will pay using the plan is approximately <u>$1,545.8</u>
- Fourth part: The amount the car costs Molly using the plan is approximately <u>$26,540.8</u>
Reasons:
The question parameters are;
Molly is comparing Auto Loans on Jeep website
Selling price of the Jeep, P = $25,495
The down payment Molly has = $2,500
The Cash Allowance = $500
Number of months of payment, n = 84 months
The Annual Percentage Rate, APR, <em>r</em> = 1.9%
First Part:
Loan needed = $25,495 - $2,500 - $500 = $22,495
The amount of loan Molly needs = <u>$22,495</u>
Second Part:
The monthly payment is given by the formula;
Therefore;
Molly's monthly payment will be <em>M</em> ≈ <u>$286.2</u>
Third part:
The total interest, <em>I</em> = Sum of payment - Loan amount
∴ The total interest, <em>I </em>≈ $286.2/month × 84 month - $22,495 ≈ $1,545.8
The total interest Molly will pay using the loan, <em>I</em> ≈ <u>$1,545.8</u>
Fourth part:
The cost of the car, <em>C</em>, using the 1.9% APR financing plan is the sum of the down payment plus sum of the loan repayment
Therefore;
C ≈ $2,500 + $286.2/month × 84 months = $26,540.8
The cost of the car using the 1.9% APR financing plan, C ≈ <u>$26,540.8</u>
<em>The question parameters obtained from a similar question are;</em>
<em>Selling price of the car = $25,495</em>
<em>Financing = 1.9% APR for 84 months with a cash allowance of $500</em>
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