Assuming that each loan would be amortized by 36 equal monthly installments, determine the amount of interest she would have paid at the end of 3 years for each loan.
Darla purchased a new car during a special sales promotion by the manufacturer. She secured a loan from the manufacturer in the amount of $23,000 at a rate of 4.7%/year compounded monthly. Her bank is now charging 6.1%/year compounded monthly for new car loans. Assuming that each loan would be amortized by 36 equal monthly installments, determine the amount of interest she would have paid at the end of 3 years for each loan. How much less will she have paid in interest payments over the life of the loan by borrowing from the manufacturer instead of her bank? (Round your answers to the nearest cent.)
| interest paid to manufacturer | $ |
| interest paid to bank | $ |
| savings | $ |
Interest is the amount paid in proportion to the amount of loan taken or the deposit. It is the amount paid on the initial deposit. It is paid by the borrower to the lender of the money upon a particular rate. Interest also represent the amount of ownership.
The interest rate can be calculated as follows:
Where,
I = Amount of interest paid
A = Final or future amount
P = Principal amount or Initial amount
r = Rate of interest
n = Number of compounding period
t = Time period
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