Chris and John are buying the same car, a 2014 Nissan Maxima. Chris is financially responsible, has a great credit score, a 3% interest rate, and $4,000 down payment. John has had financial struggles and is approved with a 12% interest rate if he pays $5000 down payment. How much more will John pay for the car if it costs $22,500? They will both finance for 5 years.

Consider the scenario above. Answer the questions. Show your work and explain your process. In your explanation be sure to explain why "it costs more to be poor".

Question

Davies

Mathematics

8 February, 13:42

Chris and John are buying the same car, a 2014 Nissan Maxima. Chris is financially responsible, has a great credit score, a 3% interest rate, and $4,000 down payment. John has had financial struggles and is approved with a 12% interest rate if he pays $5000 down payment. How much more will John pay for the car if it costs $22,500? They will both finance for 5 years.

Consider the scenario above. Answer the questions. Show your work and explain your process. In your explanation be sure to explain why "it costs more to be poor".

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Answers (1)

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Lorelai Ross · Answer 1

Total amount paid by Chris = 4000 + (22500 - 4000) (1 + 0.03) ^5 = 4000 + 18500 (1.03) ^5 = 4000 + 21446.57 = $25446.57

Total amount paid by John = 5000 + (22500 - 5000) (1 + 0.12) ^5 = 5000 + 17500 (1.12) ^5 = 5000 + 30840.98 = $35,840.98

John paid $10,394.41 more than Chris.