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31 May, 23:46

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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  1. 1 June, 01:49
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    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.
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