Beruflich Dokumente
Kultur Dokumente
Aaron Marcus
Mrs. Dewey
FST
3 May 2016
As I started getting older, I realized that at some point Id learn how to drive. Even
though I havent gone through drivers training and gotten a permit yet, I still think about buying
a car. Now that I have a job, it is essential that I find a good price for a car but not now.
of garbage truck Im interested in, a 2017 Kenworth T 270 Garbage Truck, costs about $123,900.
For a 6% sales tax, the cost of the truck would be approximately $131,334. After a 20% down-
Looking from Bank of America.com, the average amount of interest for a used car is
2.74%. This is ideal because I dont have a lot of money and would be able to pay the car off
Figure 1, above, shows the garbage truck that I would like to purchase.
Part A
To determine the monthly payment for the 60 month loan out on the garbage truck, I am
using the equation below, where P is the principle (total price of the car), r is the monthly interest
rate (which is the annual rate divided by 12), and n is the number of months that the loan will
P ( 1+r )n r
Payment=
( 1+r )n1
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Figure 2, below, models the monthly payment calculation for the garbage truck.
P ( 1+r )n r
Payment=
( 1+r )n1
$ 105,067.20(1+0.0022833)60 0.0022833
(1+ 0.0022833)601
275.0805
0.1466
= 1875.80
Figure 2 dictates that the monthly payment would be $1875.80. This can be confirmed
using a calculator function on a Ti Nspire calculator that calculates monthly loan payments. The
number of payments, annual interest rate as a loan, loan amount, final amount, number of
payments per year, and number of compounding per year can be plugged in respectively.
Figure 3, above, shows the numbers plugged into the function to generate the monthly
payment. The value is 1 cent off of the calculated value, which can be attributed to rounding of
the interest number and other such values along the way; however, this difference is not at all
significant. The value is also negative to show that the buyer is paying money, meaning the buyer
is losing it.
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Part B
Table 1
Loan Amount, Interest, and Payment Calculations.
Table 1, above, shows the calculations done for the monthly interest and amount owed
per month for the first and last ten months (actually last 11). The current months principle can be
Figure 4 states the values needed and calculation used to find the current months
principle.
The current months interest can be found by using the equation below:
annualinterest
Interest= principle
12
Figure 5, above, shows the calculations necessary to generate the interest paid per month.
Note that the monthly interest is found by dividing the annual interest by 12.
By adding up all of the interest payments and all of the monthly payments (including the
20% down-payment), I will end up spending about $146295.93, a whopping $22395.93 more
Part C
By adding 10% of the monthly payment to the original monthly payment, the loan would
be paid off quicker, but at a higher cost per month. To add 10% to the original payment, take the
monthly payment and multiply it by 0.1, then add it to the original payment. The equation is
modelled below:
(1875.800.1)+1875.80
2063.38
Figure 5 shows the amount generated from adding 10% of the monthly payment to the
Table 2.
Principle, Interest, and Monthly Payments with Added 10%
Table 2, above, shows the calculations done for the monthly interest and amount owed
per month for the first and last ten months (again, actually last 11) with the added 10% payment.
By adding the extra 10%, the loan time was decreased by 5 months and saved $726.38 in interest
payments. The cost of the garbage truck would then come out to $146507.44, which is still a
Part D
Lets say, instead, I decide to take out a 3 year loan instead of a 5 year loan. The amount
of interest paid would be around the same; however, the loan would be paid off sooner and the
monthly payment would be way higher. According to Bank of America.com, the average rate for
a 3 year loan is 4.75%. The equation used to calculate the monthly payment is shown below:
P ( 1+r )n r
Payment=
( 1+r )n1
36
$ 105067.20(1+0.003958) 0.003958
(1+ 0.0039583)36 1
$ 3137.18
With the average monthly payment being $3137.18, we can then calculate the amount of
interest paid, the amount of time taken to pay off the loan, and the total cost.
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Table 3.
Principle, Interest, and Monthly Payment for 3 Year Loan
Table 1, above, shows the numbers generated in terms of interest and principle owed each
month. The cost in interest is about $4549.91, which is an astronomical amount. The total cost of
the loan is approximately $140618.01, also a huge amount larger than the cost of the garbage
truck.
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Again, how much money would be saved if an extra 10% of the monthly payment was
added to the payment each month? Through running calculations, the monthly payment would
change to $3450.90.
Table 4.
Principle, Interest, and Monthly Payment for 3 Year Loan with 10% Extra
Table 4, above, shows the principle amount owed by month along with the interest
amount owed by month. The loan would be shortened by 4 months at the expense of a ginormous
monthly payment. The amount paid for the loan would be $140840.34
Conclusion
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If given the choice, Id pick the 3 year loan; it has the lowest cost and would take a short
amount of time to pay off. It would be good to have the loan paid off before I started college.
From this activity, I learned that there are several different ways to take out a loan and
pay it back, and checking into all of your options will help a lot. I also learned that there is way
more to buying a garbage truck than handing the owner a bunch of money and driving around
Works Cited
Bank of America Banking, Credit Cards, Mortgages and Auto Loans. Web. 01 May 2016.
<https://www.bankofamerica.com/>.
"Trucks and Trailers for Sale." Commercial Truck Trader. Web. 01 May 2016.
<http://www.commercialtrucktrader.com/>.