Question

Nellie has a bankruptcy on her credit report and therefore pays higher interest rates on her current loans. She took out a car loan for $45,000 payable for 6 years at an interest rate of 15%. If she had not applied for bankruptcy, she would have been able to take out the loan at a rate of 6%. Approximately how much more in interest over the life of the loan does Nellie have to pay?
a.
$68,510.16
b.
$53,696.16
c.
$32,206.32
d.
$14,814.00



Please select the best answer from the choices provided


A
B
C
D

Answer 1

Compute monthly payments (amortized loan) for each rate, then total interest.

Monthly payment formula: M = L * i / (1 - (1+i)^-n), with L = 45,000, n = 72 months.

At 15% APR: i = 0.15/12 = 0.0125 → total paid ≈ $68,510.16 → interest paid ≈ $68,510.16 − $45,000 = $23,510.16.

At 6% APR: i = 0.06/12 = 0.005 → total paid ≈ $53,696.16 → interest paid ≈ $53,696.16 − $45,000 = $8,696.16.

Difference in interest = $23,510.16 − $8,696.16 = $14,814.00.

Answer: D.