In order to make some home improvements, a home owner spent $40,000. He paid 20% as a down payment and financed the balance of the purchase with a 36-month fixed installment loan with an APR of 7.5%. Determine the home owner’s a) total finance charge and b) monthly payment..

Question

Use this partial APR table for finance charge per $100

Payments
Number Annual percentage rate
ofPmts 7.00% 7.50% 8.00% 8.50%
24 7.45 8.00 8.54 9.09
30 9.30 9.98 10.66 11.35
36 11.16 11.98 12.81 13.64

Each entry in the table represents finance charge/$100 at the given terms.

Answer 1

the monthly rate i is .075/12 = .00625

He finances 32,000 dollars, so

32000 = paym[1 - 1.00625^(-36)]/.00625

this gave me a payment of $995.40

his total interest charge is 32000 - 36*995.40
= $3834.36

If I use your chart, the interest charge would be 11.96*36 = $3833.60 a difference of 76 cents.

I was using the accepted compound interest formula

Present value = paym(1 - (1+i)^-n)/i

Answer 2

the interest charge would be 11.96*36 = $3833.60 a difference of 76 cents

Hi how did you get the 3833.6 from multiplying 11.96*36.

Thanks

Answer 3

sorry, I meant to type 11.98*32000/100 = 3833.60

I think I was thinking of my own calculation.

Answer 4

Thanks