Questions: Suppose that you decide to borrow 17,000 for a new car. You can select one of the following loans, each requiring regular monthly payments. Installment Loan A: three-year loan at 5.5% Installment Loan B: five-year loan at 5.8% Use PMT = (P(r/n))/(1-(1+(r/n))^(-nt)) to complete parts (a) through (c) below. a. Find the monthly payments and the total interest for Loan A. The monthly payment for Loan A is (Do not round until the final answer. Then round to the nearest cent as needed.)

Solution Steps

To convert the annual interest rate to a decimal, divide by 100: \(r = 5.5 / 100 = 0.055\).

The monthly interest rate is calculated by dividing the annual interest rate by the number of payment periods per year: \(\frac{r}{n} = \frac{0.055}{12} = 0.00458\).

Using the PMT formula: \(PMT = \frac{P\left(\frac{r}{n}\right)}{\left[1-\left(1+\frac{r}{n}\right)^{-n t}\right]} = 513.33\).

The total amount paid over the term of the loan is calculated by multiplying the monthly payment by the total number of payments: \(PMT \times n \times t = 18479.89\).

The total interest paid is the total amount paid over the term of the loan minus the principal amount: \(Total Paid - P = 18479.89 - 17000 = 1479.89\).

Final Answer: