Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced. To buy a car, you borrow $28,000 with a term of five years at an APR of 5%. What is your monthly payment? (Round your answer to the nearest cent.)
$

How much total interest is paid? (Round your answer to the nearest cent.)
$

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Step-by-step explanation:

The monthly payment is given by the amortization formula:

  A = P(r/12)/(1 -(1 +r/12)^(-12t))

where the annual interest rate is r for t years on loan value P.

Filling in the given information, we find the monthly payment to be ...

  A = $28000(0.05/12)/(1 -(1 +0.05/12)^(-12·5)) ≈ $528.39

The monthly payment is $528.39.

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The total amount repaid is ...

  ($528.39/mo)(60 mo) = $31,703.40

The interest paid is the difference between this and the loan amount:

  interest paid = $31,703.40 -28,000 = $3,703.40

The total interest paid is $3,703.40.

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