You have selected a Ford Mustang with a stickerprice of $26500. The dealer will

Question

    You have selected a Ford Mustang with a stickerprice of $26500. The dealer will give you and 8% discount if yousing the papers today. You are buying this car in Maryland so thereis a 6% sales tax which must be paid on the agreed price of the carwhich is the sticker price minus the discount. Ford Corporation isalso offering a $1500 rebate on this car and you have $6500 cashfor a down payment. Other costs are the $165 for tags and title andthe tire recycling fund fee of $2 that Maryland charges forthe cleanup and disposal of old tires. You will finance theremainder of the cost of the car at 4.2% compounded monthly for5yrs.
    a) How much is the loan?
    b) What is your monthly payment?
    c) If you make all the payments for 5yrs, howmuch interest will you pay on this loan? (assume all           payments are the same for this problem.)

Explanation / Answer

The price agreed upon by the dealer and customer.
Because tax applies to everything we must total up the feesbefore applying the tax of 6%. $24,380 + $165 + $2 = $24,547 * ( 1+ .06) = $26,019.82
Now we can subtract the rebate and your down payment. $26,019.82 - $1,500 - $6,500 = 18,019.82
Using APPS > Finance > TVM Solver on a TI-84 or TI-83Calculator we can solve for the monthly payments. Number of payments = 5 yrs. * 12 months = 60. $18,019.82 with a 4.2% interest means you will have topay: $333.49/month if payments are made at the end of the monthwitch will cost a total of $1989.58 in interest. or $332.33/month if payments are made at the beginning of themonth which will cost a total of $1919.98 in interest.

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