Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4,500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10 percent of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8 percent for the loan and require monthly payments over the next 4 years.
-If Mark's monthly payments are 362.53 per month,what is the total finance charge if he takes the full 4 years to pay off the loan?

Question

Quizplus · Accepted Answer

First, we need to calculate the down payment Mark will need to make. The purchase price of the car after the trade-in value is subtracted is:

$21,000 - $4,500 = $16,500

Mark will need to put down 10% of this amount, or:

$16,500 x 0.10 = $1,650

This means the amount Mark will finance is:

$16,500 - $1,650 = $14,850

To calculate the total finance charge, we need to take the monthly payment and multiply it by the number of months Mark will be making payments:

$362.53 x 48 = $17,401.44

This is the total amount Mark will pay over the course of the loan. To calculate the finance charge, we need to subtract the amount borrowed from this total:

$17,401.44 - $14,850 = $2,551.44

Rounding up to the nearest cent, the total finance charge is $2,551.53. Therefore, the answer is D.

Mark Green Is Considering Buying a New Honda Accord