After careful comparison shopping, Bruce Peters decides to buy a new Toyota Venza. With some options added, the car has a price of $29,500—including plates and taxes. Because he can’t afford to pay cash for the car, he will use some savings and his old car as a trade-in to put down $9,500. He plans to finance the rest with a $20,000, 60-month loan at a simple interest rate of 9.5%.

a. What will his monthly payments be?

b. How much total interest will Bruce pay in the first year of the loan? (Use a monthly payment analysis procedure similar to the one in Exhibit 7.6.)

c. How much interest will Bruce pay over the full (60-month) life of the loan?

d. What is the APR on this loan?

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Exhibit 7.6 Monthly Payment Analysis for a Simple Interest Installment Loan (Assumes a $1,000, 8%, 12-Month Loan) Outstanding Loan Balance Month at Beginning of Month (1) Monthly Payment Part of each monthly payment on an installment loan goes to interest and part to principal. As the loan is paid down over time, less and less of each payment goes to interest and more and more goes to principal. Interest Charges [(1) x 0.00667] Principal [(2)-(3)] (2) (3) (4) 1 $1,000.00 2345 919.68 838.82 757.42 675.49 6 593.00 7 509.97 8 426.38 $ 9 342.23 10 257.52 11 172.25 12 86.41 SALASA A LA LA LA LA LA LA LA GA $ 86.99 $ 6.67 $ 80.32 $ 86.99 6.13 80.86 $ 86.99 5.59 81.40 $ 86.99 5.05 81.94 $ 86.99 4.50 82.49 $ 86.99 3.95 83.03 $ 86.99 3.40 83.59 86.99 2.84 84.15 $ 86.99 2.28 84.71 $ 86.99 1.72 85.27 $ 86.99 1.15 85.84 Total $ 86.99 $1,043.88 0.58 86.41 $43.88 $1,000.00 Note: Column-1 values for months 2 through 12 are obtained by subtracting the principal payment shown in column 4 for the preceding month from the outstanding loan balance shown in column 1 for the preceding month; thus, $1,000-$80.32 $919.68, which is the outstanding loan balance at the beginning of month 2.