Type the correct answer in the box. Use numerals instead of words.

Bruce is considering purchasing a car for $10,000. He is thinking about using his savings to make a [tex]20\%[/tex] down payment and then financing the difference over a 4-year loan.

If he doesn't make the down payment, he'll qualify for an interest rate of [tex]8.0\%[/tex].
If he makes the down payment, he'll qualify for an interest rate of [tex]7.0\%[/tex].

Use the amortization table provided to complete the statement. Round to the nearest cent, if necessary.

Making the down payment will lower Bruce's monthly car payment by [tex]\square[/tex] per month.



Answer :

To determine how much Bruce will save on his monthly car payment by making a 20% down payment, let's follow these steps:

1. Calculate the down payment:
[tex]\[ \text{Down payment} = \$510,000 \times 0.20 = \$102,000.00 \][/tex]

2. Determine the loan amount without a down payment:
[tex]\[ \text{Loan amount without down payment} = \$510,000.00 \][/tex]

3. Determine the loan amount with a 20% down payment:
[tex]\[ \text{Loan amount with down payment} = \$510,000 - \$102,000 = \$408,000.00 \][/tex]

4. Calculate the annual interest rates:
- Without down payment: [tex]\(8.0\% \text{ annually}\)[/tex]
- With down payment: [tex]\(7.0\% \text{ annually}\)[/tex]

5. Convert the annual interest rates to monthly interest rates:
- Without down payment:
[tex]\[ \text{Monthly interest rate} = 0.08 / 12 = 0.0066667 \][/tex]
- With down payment:
[tex]\[ \text{Monthly interest rate} = 0.07 / 12 = 0.0058333 \][/tex]

6. Number of monthly payments for a 4-year loan:
[tex]\[ \text{Number of payments} = 4 \times 12 = 48 \][/tex]

7. Calculate monthly payment without down payment using the amortization formula:
[tex]\[ \text{Monthly payment without down payment} = \$12,450.59 \][/tex]

8. Calculate monthly payment with down payment using the amortization formula:
[tex]\[ \text{Monthly payment with down payment} = \$9,770.07 \][/tex]

9. Calculate the difference in monthly payments:
[tex]\[ \text{Monthly savings} = \$12,450.59 - \$9,770.07 = \$2,680.52 \][/tex]

Therefore, by making the down payment, Bruce's monthly car payment will be lower by \$2,680.52 per month.

[tex]\(\boxed{2680.52}\)[/tex]