Question

Say you buy your dream car for 223,695. Determine the monthly payment, the total payment, and the amount of interest you would pay for each of the following payment options (show all formaulas used):

A. 2% interest rate for 36 months

B. 3% interest rate for 48 months

C. 4% interest rate for 60 months

D. 5% interest rate for 72 months

Answer 1

	The amortization formula to be used to find the monthly installment
	is 223695*(r/12)*((1+r/12)^m/((1+r/12)^m-1))
	where r = rate per year in decimals
	m = number of months
	Applying the formula, the monthly payments and other amounts are calculated below:	Monthly payment	Total payment	Total interest
A)	=223695*(0.02/12)*((1+0.02/12)^36/((1+0.02/12)^36-1)) =	$        6,407.20	$ 2,30,659.26	$     6,964.26
B)	=223695*(0.03/12)*((1+0.03/12)^48/((1+0.03/12)^48-1)) =	$        4,951.34	$ 2,37,664.24	$   13,969.24
C)	=223695*(0.04/12)*((1+0.04/12)^60/((1+0.04/12)^60-1)) =	$        4,119.68	$ 2,47,181.03	$   23,486.03
D)	=223695*(0.05/12)*((1+0.05/12)^72/((1+0.05/12)^72-1)) =	$        3,602.59	$ 2,59,386.69	$   35,691.69
	Total payment = Monthly installment*Number of months
	Total interest = Total payment - 223695