Answer:
[tex]\$4701.80[/tex]
Step-by-step explanation:
Mrs. Siebenaller bought a bus for 25,000 with a 7% interest rate and she gets a loan payoff of 60 months,
We know that,
[tex]\text{PV of annuity}=P\left[\dfrac{1-(1+r)^{-n}}{r}\right][/tex]
Where,
PV = Present value of annuity = 25000,
r = rate of interest of each period = [tex]\dfrac{7}{12}[/tex]% monthly
n = number of periods = 60 months,
Putting the values,
[tex]\Rightarrow 25000=P\left[\dfrac{1-(1+\frac{0.07}{12})^{-60}}{\frac{0.07}{12}}\right][/tex]
[tex]\Rightarrow P=\dfrac{25000}{\left[\dfrac{1-(1+\frac{0.07}{12})^{-60}}{\frac{0.07}{12}}\right]}[/tex]
[tex]\Rightarrow P=\$495.03[/tex]
Hence total amount paid is,
[tex]=495.03\times 60=\$29,701.80[/tex]
Therefore interest amount is,
[tex]=29,701.80-25,000=\$4701.80[/tex]
