Chapter 7

Financial Planning Exercise 8

Calculating payments, interest, and APR on auto loan

After careful comparison shopping, Isabella Green decides to buy a new Toyota Camry. With some options added, the car has a price of $26,500 - including plates and taxes. Because she can't afford to pay cash for the car, she will use some savings and her old car as a trade-in to put down $10,500. She plans to finance the rest with a $16,000, 48-month loan at a simple interest rate of 12.5 percent.

A. What will her monthly payments be? Round the answer to the nearest cent.

$_____ per month

B. How much total interest will Isabella pay in the first year of the loan? Round the answer to the nearest cent.

$_____

C. How much interest will Isabella pay over the full (48-month) life of the loan? Round the answer to the nearest cent.

$_____

D. What is the APR on this loan? Round the answer to 1 decimal place.

_____ %