(1 point)

Question

Use the table for interest rate questions. Round to the nearest penny.
Secured Unsecured
Credit APR APR
Excellent 4.75% 5.50%
Good 5.00% 5.90%
Average 5.85% 6.75%
Fair 6.40% 7.25%
Poor 7.50% 8.40%

You are purchasing a car for $12,465.00 plus 5.65% sales tax. You make a $1,300.00 down payment and have a fair credit score. How much interest is due at the end of the first month?
$
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Answer 1

To calculate the interest due at the end of the first month for your car purchase, follow these steps:

1. Calculate the total purchase price including sales tax:

   • Car price: $12,465.00
   • Sales tax rate: 5.65%
   • Sales tax amount = $12,465.00 * 5.65% = $12,465.00 * 0.0565 = $705.47
   • Total purchase price = Car price + Sales tax = $12,465.00 + $705.47 = $13,170.47

2. Calculate the loan amount after the down payment:

   • Down payment: $1,300.00
   • Loan amount = Total purchase price - Down payment = $13,170.47 - $1,300.00 = $11,870.47

3. Determine the APR for fair credit on a secured loan:

   • For fair credit, the APR for a secured loan is 6.40% (or 0.064).

4. Calculate the monthly interest rate:

   • Monthly interest rate = Annual interest rate / 12 = 0.064 / 12 ≈ 0.0053333

5. Calculate the interest due at the end of the first month:

   • Interest for the first month = Loan amount * Monthly interest rate = $11,870.47 * 0.0053333 ≈ $63.36

Therefore, the interest due at the end of the first month is approximately:

$63.36.