You want to buy a new SUV from your local Ford dealer. The total price of...

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Finance

You want to buy a new SUV from your local Ford dealer. The totalprice of the SUV is $40,000 including tax ,tag ,title, and allfees. You can afford to pay 15% as a down payment and will need tofinance the remainder. Ford credit offers you a special studentrate 2.75% (compounded monthly) for 72 months. You will makemonthly payments starting 1-month from today). What is the monthlypayment?
Answer choices:
A.$603.28
B. $543.79
C.$500.92
D. $512.79

Answer & Explanation Solved by verified expert

4.1 Ratings (809 Votes)

Loan = price-downpayment = 40000-0.15*40000=34000

	Monthly rate(M)=	yearly rate/12=	0.23%	Monthly payment=	512.79
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	34000.00	512.79	77.92	434.87	33565.13
2	33565.13	512.79	76.92	435.87	33129.25
3	33129.25	512.79	75.92	436.87	32692.38
4	32692.38	512.79	74.92	437.87	32254.51
5	32254.51	512.79	73.92	438.87	31815.64
6	31815.64	512.79	72.91	439.88	31375.76
7	31375.76	512.79	71.90	440.89	30934.87
8	30934.87	512.79	70.89	441.90	30492.97
9	30492.97	512.79	69.88	442.91	30050.06
10	30050.06	512.79	68.86	443.93	29606.13
11	29606.13	512.79	67.85	444.94	29161.19
12	29161.19	512.79	66.83	445.96	28715.23
13	28715.23	512.79	65.81	446.99	28268.24
14	28268.24	512.79	64.78	448.01	27820.23
15	27820.23	512.79	63.75	449.04	27371.20
16	27371.20	512.79	62.73	450.07	26921.13
17	26921.13	512.79	61.69	451.10	26470.03
18	26470.03	512.79	60.66	452.13	26017.90
19	26017.90	512.79	59.62	453.17	25564.74
20	25564.74	512.79	58.59	454.21	25110.53
21	25110.53	512.79	57.54	455.25	24655.28
22	24655.28	512.79	56.50	456.29	24199.00
23	24199.00	512.79	55.46	457.34	23741.66
24	23741.66	512.79	54.41	458.38	23283.28
25	23283.28	512.79	53.36	459.43	22823.84
26	22823.84	512.79	52.30	460.49	22363.36
27	22363.36	512.79	51.25	461.54	21901.82
28	21901.82	512.79	50.19	462.60	21439.22
29	21439.22	512.79	49.13	463.66	20975.56
30	20975.56	512.79	48.07	464.72	20510.83
31	20510.83	512.79	47.00	465.79	20045.05
32	20045.05	512.79	45.94	466.85	19578.19
33	19578.19	512.79	44.87	467.92	19110.27
34	19110.27	512.79	43.79	469.00	18641.27
35	18641.27	512.79	42.72	470.07	18171.20
36	18171.20	512.79	41.64	471.15	17700.05
37	17700.05	512.79	40.56	472.23	17227.82
38	17227.82	512.79	39.48	473.31	16754.51
39	16754.51	512.79	38.40	474.40	16280.12
40	16280.12	512.79	37.31	475.48	15804.63
41	15804.63	512.79	36.22	476.57	15328.06
42	15328.06	512.79	35.13	477.66	14850.40
43	14850.40	512.79	34.03	478.76	14371.64
44	14371.64	512.79	32.94	479.86	13891.78
45	13891.78	512.79	31.84	480.96	13410.83
46	13410.83	512.79	30.73	482.06	12928.77
47	12928.77	512.79	29.63	483.16	12445.61
48	12445.61	512.79	28.52	484.27	11961.34
49	11961.34	512.79	27.41	485.38	11475.96
50	11475.96	512.79	26.30	486.49	10989.47
51	10989.47	512.79	25.18	487.61	10501.86
52	10501.86	512.79	24.07	488.72	10013.13
53	10013.13	512.79	22.95	489.84	9523.29
54	9523.29	512.79	21.82	490.97	9032.32
55	9032.32	512.79	20.70	492.09	8540.23
56	8540.23	512.79	19.57	493.22	8047.01
57	8047.01	512.79	18.44	494.35	7552.66
58	7552.66	512.79	17.31	495.48	7057.18
59	7057.18	512.79	16.17	496.62	6560.56
60	6560.56	512.79	15.03	497.76	6062.80
61	6062.80	512.79	13.89	498.90	5563.91
62	5563.91	512.79	12.75	500.04	5063.87
63	5063.87	512.79	11.60	501.19	4562.68
64	4562.68	512.79	10.46	502.33	4060.34
65	4060.34	512.79	9.30	503.49	3556.86
66	3556.86	512.79	8.15	504.64	3052.22
67	3052.22	512.79	6.99	505.80	2546.42
68	2546.42	512.79	5.84	506.96	2039.47
69	2039.47	512.79	4.67	508.12	1531.35
70	1531.35	512.79	3.51	509.28	1022.07
71	1022.07	512.79	2.34	510.45	511.62
72	511.62	512.79	1.17	511.62	0.00

Where

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance

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