The price of the car
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1. For the purpose of this exercise, you can ignore sales tax.
2. Determine the annual interest rate for your loan using information from a local bank or an internet ad. Reduce this rate by 1%. This is r expressed as a decimal.
3. Decide the time, in years, you wish to repay the loan (typically, 3-7 years, half years are ok). This is t.
4. Determine the interest on your loan, using the formula:
â?¦interest = sale price*rate*time, (I = prt).
5. Determine the total cost of your loan, using the formula:
â?¦Total cost = (sale price*rate)time + Sale Price
6. Model the total cost as a linear function, with time as the independent variable:
â?¦F(t) = (pr)t + p.
7. Divide the total cost by the number of months, to determine the monthly payment.
8. Repeat steps 4 & 5 to determine the cost of the loan if the interest rate had not been reduced by 1% â?" how much money did you save?
9. Summarize your findings by writing a brief statement that includes the pertinent information from the steps above; rates, totals, savings, etc
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Solution Summary
The price of the car is determined in this tutorial.
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The price of the car is $16,000
The average annual interest is 12% in our local bank.
When we reduce the rate by 1%, we can avail the loan for 5
% interest. (r = ...
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