I am hoping to buy a new car. The new car that I am hoping to buy costs $27500. I anticipate that the dealer will give me a $3000 credit for trading in my old car, which will reduce the amount that I will need to finance. I am planning on financing the car for 4 years at 3.25%.

a. Using the above information, determine the amount of my monthly car payment.

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After hearing that my car payment will be the amount indicated in part a, I ask the dealer how much my payments would be if I finance the car for 6 years. This makes the car more affordable.

b. Determine the monthly payments if I finance the car for 6 years instead of 4 years.

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c. We all know that even though the payment amounts are lower if I extend the years of the loan, I will pay more in finance charges over time. How much more money would it cost me over the life of the loan if I finance the car for 6 years instead of 4 years?

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