   Chapter 13.II, Problem 4TIE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

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 $12,500, down payment percent is 15%, monthly payment is$309.90 and number of payments is 48.

Explanation

Given Information:

The purchase price of Bob Johnson’s car is $12,500, down payment percent is 15%, monthly payment is$309.90 and number of payments is 48.

Formula used:

The formula for amount financed is,

Amount financed=Purchase priceDown payment

The formula for the down payment,

Down payment=Purchase Price×Down Payment Percent

The formula for total amount of installments payment is,

Total amount of installment payments=Monthly payment amount×Number of monthly payments

The formula for finance charge is,

Finance charge=Total amount of installment paymentsAmount financed

Calculation:

Consider that purchase price of Bob Johnson’s car is $12,500, down payment percent is 15%, monthly payment is$309.90 and number of payments is 48.

Compute down payment by substituting purchase price to $12,500 and down payment percent is 0.15, Down payment=Purchase Price×Down Payment Percent=$12,500 × 0.15=$1,875 Hence, down payment is$1,875

(b)

To determine

To calculate: The total deferred payment price for the installment if Bob Johnson’s total amount of installment payment is $14,875.20 and down payment is$1,875.

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