Question

Asked Nov 19, 2019

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Suppose that you decide to borrow 16000 for a new car. You can select one of the following loans each requiring regular monthly payments.

Installment loan A three-year loan at 6.3%

Installment loan B five -year loan at 6.4%

What would be the monthly payments for each loan and total interest for them also? How much will the buyer save in interest?

Step 1

Loan A has a term of 3 years with 6.3% interest.

The formula to calculate monthly payment is given below:

Step 2

Substitute 6.3% for *i*, 12 for *p* and 3 for *n*, and $16,000 for loan amount,

Step 3

Total interest paid on the loan...

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