Car Loan

Simple Interest Car Loan Linear Function

The car of my dreams is a 1969 Chevrolet El Camino. The sale price is $13,000. The loan is for 48 months or 4 years at 2.83% - 1% = 1.83% or 0.0183.

1. Search the Internet and locate the sale price for the car of your dreams. (For the purpose of this exercise, you can ignore sales, down payments, taxes, and other normal purchase expenses.) This is p in this assignment. Sale Price (p)=$13,000

2. Determine the annual interest rate for your loan using information from a local bank or an internet ad and be sure to give your references. Reduce this rate by 1%. This is one value of r, but expressed as a decimal. The decimal equivalent of this interest rate is one of the values of r in this assignment. 1.83% or (r)= .0183 (2.83% APR - 1%)

3. Decide the time, in years, you wish to repay the loan (typically, 3-7 years, half years like 5.5 years are okay). This is t in this assignment. (t)= 4yrs or 48 months

4. Determine the interest on your loan, using the formula:

* Interest = sale price*time*rate, (I = ptr). (Interest) $951.60 =$13,000*4*.0183

5. Determine the total cost of your loan, using the formula:

* Total cost = (sale price*time)rate + Sale Price Total Cost=($13,000*6) 0.0183+$13,000

Total Cost =$13,951.60

6. Model the total cost as a linear function, with interest rate as the independent variable:

* TC(r) = (pt)r + p. $13,951.60(.0183)=($13000÷6).0183 + $13,000 = $14,903.20

r=0.0183

F=(r=0.0183) =$951.60+$13,951.60

F=(r=0.0183) =$14,903.20

7. Divide the total cost by the number of months, to determine the monthly payment.

$14,903.20 ÷ 48= $310.48 monthly payments

8. Repeat steps 4, 5, 6, and 7 to determine the cost of the loan if the interest rate had not been reduced by 1% – how much money did you save monthly and in total?

Step 4: (Interest) $1,471.60 =$13,000*4*.0283

Step 5: Total cost = (sale price*time)rate + Sale Price Total Cost=($13,000*6) 0.0283+$13,000

Total...