After visiting several automobile dealerships, Richard selects the car he wants. He likes its $12,000 price, but financing through the dealer is no bargain. He has $2,400 cash for a down payment, so he needs a loan of $9,600. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $9,600 for a period of five years at an add-on interest rate of 13 percent. a. What is the total interest on Richard's loan? Total interest b. What is the total cost of the car? Total cost C. What is the monthly payment?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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21
After visiting several automobile dealerships, Richard selects the car he wants. He likes its $12,000 price, but financing through the
dealer is no bargain. He has $2,400 cash for a down payment, so he needs a loan of $9,600. In shopping at several banks for an
installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest
is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $9,600 for a period of
five years at an add-on interest rate of 13 percent.
a. What is the total interest on Richard's loan?
Total interest.
b, What is the total cost of the car?
Total cost
c. What is the monthly payment?
Monthly payment
Transcribed Image Text:21 After visiting several automobile dealerships, Richard selects the car he wants. He likes its $12,000 price, but financing through the dealer is no bargain. He has $2,400 cash for a down payment, so he needs a loan of $9,600. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $9,600 for a period of five years at an add-on interest rate of 13 percent. a. What is the total interest on Richard's loan? Total interest. b, What is the total cost of the car? Total cost c. What is the monthly payment? Monthly payment
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