Answer:
Step-by-step explanation:
The cost of the car is $12,000
We would apply the periodic interest rate formula which is expressed as
P = a/[{(1+r)^n]-1}/{r(1+r)^n}]
Where
P represents the monthly payments.
a represents the cost of the car
r represents the interest rate
n represents number of monthly payments. Therefore
a = 12000
r = 3%/12 = 0.03/12 = 0.0025
n = 12 × 4 = 48
Therefore,
P = 12000/[{(1+0.0025)^48]-1}/{0.0025(1+0.0025)^48}]
12000/[{(1.0025)^48]-1}/{0.0025(1.0025)^48}]
P = 12000/{1.127 -1}/[0.0025(1.127)]
P = 12000/(0.127/0.0028175)
P = 12000/45.075
P = $266.22
The monthly payment is $266.22
The total amount that would be paid over the life of the loan is
266.22 × 48 = $12778.56
The amount of interest paid is
12778.56 - 12000 = $778.56
