Question

Is anyone good at calculating total cost of a loan?
I've tried to work this problem out 5 times and I can't get the right answer

Camille purchased a motorcycle for $5,723. She made a down payment of $1,775. She applied for a four-year installment loan with an interest rate of 10.2%. What is the total cost of the motorcycle after four years?

Answer 1

You want to calculate the interest on $3948 at 10.2% interest per year after 4 year(s).
The formula we'll use for this is the simple interest formula, or:

I = p x r x t

Where:
P is the principal amount, $3948.00.
r is the interest rate, 10.2% per year, or in decimal form, 10.2/100=0.102.
t is the time involved, 4....year(s) time periods.
So, t is 4....year time periods.
To find the simple interest, we multiply 3948 × 0.102 × 4 to get that:
The interest is 1610.78

Usually now, the interest is added onto the principal to figure some new amount after 4 year(s),
or 3948.00 + 1610.78 = 5558.78. For example:

If you borrowed the $3948.00, you would now owe $5558.78
If you loaned someone $3948.00, you would now be due $5558.78
If owned something, like a $3948.00 bond, it would be worth $5558.78 now.