Mark borrows $15,000 to buy a new car.His loan has an interest rate of 6.5%,compounded monthly,and his monthly payment is $293.49.If instead his loan had an interest rate of 8%,how much more would he have paid in interest by the time he finished repaying his loan in 60 months?
A)$225.00
B)$304.15
C)$639.60
D)$3,249.00

Question

Quizplus · Accepted Answer

Using the original interest rate of 6.5%, we can calculate the total amount Mark will pay over 60 months:
$293.49/month * 60 months = $17,609.40 total paid
The amount of interest paid can then be calculated by subtracting the original loan amount:
$17,609.40 - $15,000 = $2,609.40 interest paid

Now we can calculate how much Mark would pay in interest with an interest rate of 8%:
First, we need to calculate the new monthly payment using the same repayment schedule:
$15,000 loan at 8% compounded monthly over 60 months:
$293.49 = [($15,000 * 0.08/12) / (1-(1+0.08/12)^(-60))] * 100
Monthly payment is now: $308.40
Total amount paid over 60 months: $18,504
Amount of interest paid: $3,504

To find the difference in interest paid, we can subtract the original interest paid from the new interest paid:
$3,504 - $2,609.40 = $894.60
Therefore, Mark would pay $894.60 more in interest with an interest rate of 8%, making choice C the correct answer.

Mark Borrows $15,000 to Buy a New Car