Chapter 13.II, Problem 4TIE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Bob Johnson found a car he wanted to buy at Autorama Auto Sales. He had the option of paying $12,500 in cash or financing the car with a 4-year installment loan. The loan required a 15% down payment and equal monthly payments of $309.90 for 48 months.

a. What is the finance charge on the loan?

b. What is the total deferred payment price of Bob’s car?

**(a)**

To determine

**To calculate:** The finance charge on the loan if purchase price of Bob Johnson’s car is

Explanation

**Given Information:**

The purchase price of Bob Johnson’s car is

**Formula used:**

The formula for amount financed is,

The formula for the down payment,

The formula for total amount of installments payment is,

The formula for finance charge is,

**Calculation:**

Consider that purchase price of Bob Johnson’s car is

Compute down payment by substituting purchase price to

Hence, down payment is

**(b)**

To determine

**To calculate:** The total deferred payment price for the installment if Bob Johnson’s total amount of installment payment is

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