Question

Christopher has just made the final monthly payment necessary to pay off his car financing. The car had a list price of $25,995. He made a down payment of $2,434. Additionally, there was a $1,626 vehicle registration fee and a $275 documentation fee. He also paid sales tax of 8.44% on the cost of the vehicle. He included the taxes and fees with the purchase price of the car in a four-year finance agreement with an interest rate of 11.10%, compounded monthly.

After completing payment of the four-year loan, what was the total amount of money that Christopher paid for his car? Round to the nearest dollar.

a.
$23,310
b.
$27,656
c.
$34,374
d.
$36,808


Please select the best answer from the choices provided

A
B
C
D

Answer 1

First find the taxes and fees and the amount financed.

- Sales tax = 25,995 × 0.0844 = 2,193.98
- Registration + doc fee = 1,626 + 275 = 1,901
- Total purchase + taxes/fees = 25,995 + 2,193.98 + 1,901 = 30,089.98
- Down payment = 2,434 so amount financed = 30,089.98 − 2,434 = 27,655.98

Finance details: 11.10% APR compounded monthly → monthly rate r = 0.1110/12 = 0.00925, n = 48 months.
Monthly payment = P * [r / (1 − (1 + r)^(−n))]
≈ 27,655.98 * [0.00925 / (1 − (1.00925)^(−48))] ≈ $716 (about $716.34)

Total paid = down payment + 48 × monthly payment
≈ 2,434 + 48 × 716.34 ≈ $36,808 (rounded to the nearest dollar).

Answer: D.