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Answer:
a. The amount Taylor will need to finance is $8,000
b. The amount Taylor pays as interest in one year is $400
Step-by-step explanation:
The given parameters of the financing for the car are;
The cost of the car Taylor plans to purchase, C = $10,000
The amount Taylor has saved to be used as down payment, S = $2,000
The interest rate of the credit Taylor is offered = 5%
The duration given for repayment of the loan = 5 years
a. To purchase the car, the amount Taylor will need to finance, 'P', is given as follows;
P = C - S
∴ P = $10,000 - $2,000 = $8,000
b. The amount of interest on the loan in one year, 'I', is given by the following formula;
Where;
I = The interest payed
P = The principal amount taken as loan = $8,000
R = The interest rate = 5% APR
T = The time period the interest is applied = 1 year
Plugging in the values, we get;
The interest Taylor will pay on the loan in one year, I = $4,00