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You are considering the purchase of a BMW M5. You will borrow the money from BMW Financial...

Question:

You are considering the purchase of a BMW M5. You will borrow the money from BMW Financial Services. The terms of the deal are outlined below:

BMW M5

RWD, 500hp, 0-100 in 4.7s

MSRP = $80,000

Term = 72 months

APR = 10%

Down Payment = $0

Monthly Payments = $1,482.07

The amortized loan payments are a blend of interest and principal. What is the total amount of interest you would pay over the life of the loan? Assume that taxes are zero.

Interest:

The amount of interest is found out by deducting the principal value of the loan amount from the total amount paid as loan repayment. Sometimes, the interest amount is calculated by applying the periodic interest rate over the principle amount of loan.

Answer and Explanation:

The total amount interest paid over life of loan is $26,709.04.

Explanation: The total amount interest paid over life of loan is $26,709.04 ($1,482.07 x 72 - $80,000) which has been found out by deducting the MSRP from the total amount paid as loan amount.


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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