Dennis Lamenti wants to buy a new car that costs $15,824.24. He has two possible loans in mind. One loan is through the car dealer; it is a four-year add-on interest loan at 7 3/4% and requires a down payment of $1,000. The second is through his bank; it is a four-year simple interest amortized loan at 7 3/4% and requires a down payment of $1,000. (Round your answers to the nearest cent.) (a) Find the monthly payment for each loan. dealer $ bank $ (b) Find the total interest paid for each loan. dealer $ bank $
Dennis Lamenti wants to buy a new car that costs $15,824.24. He has two possible loans in mind. One loan is through the car dealer; it is a four-year add-on interest loan at 7 3/4% and requires a down payment of $1,000. The second is through his bank; it is a four-year simple interest amortized loan at 7 3/4% and requires a down payment of $1,000. (Round your answers to the nearest cent.) (a) Find the monthly payment for each loan. dealer $ bank $ (b) Find the total interest paid for each loan. dealer $ bank $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Dennis Lamenti wants to buy a new car that costs $15,824.24. He has two possible loans in mind. One loan is through the car dealer; it is a four-year add-on interest loan at 7 3/4% and requires a down payment of $1,000. The second is through his bank; it is a four-year simple interest amortized loan at 7 3/4% and requires a down payment of $1,000. (Round your answers to the nearest cent.)
(a) Find the monthly payment for each loan.
(b) Find the total interest paid for each loan.
(c) Which loan should Dennis choose? Why?
| dealer | $ |
| bank | $ |
(b) Find the total interest paid for each loan.
| dealer | $ |
| bank | $ |
(c) Which loan should Dennis choose? Why?
Dennis should choose the bank loan since the interest is less.Dennis should choose the car dealer loan since the interest is less.
Expert Solution
Step 1
By definition, simple interest is the interest amount for a specific principal amount of money at some rate of interest. In opposite, compound interest is the interest computed on the principal and the interest accumulated over the past period.
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