Murphy made a down payment of $2,000 on a car costing $8,000. Murphy will pay the remaining balance in 3 years at an interest rate of 12% per year compounded monthly. (a) What is the monthly payment for the car note? (b) How much interest did Murphy pay?

Murphy made a down payment of $2,000 on a car costing $8,000. Murphy will pay the remaining balance in 3 years at an interest rate of 12% per year compounded monthly. (a) What is the monthly payment for the car note? (b) How much interest did Murphy pay?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 25PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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Murphy made a down payment of $2,000 on a car costing $8,000. Murphy will pay the remaining balance in 3 years at an
interest rate of 12% per year compounded monthly.
(a) What is the monthly payment for the car note?
(b) How much interest did Murphy pay?

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