To purchase a new car it is necessary to borrow $18,550. The bank offers a 5-yr loan at an 4% interest rate of compounded annually. If you make only one payment at the end of the loan period, repaying the principal and interest, what is the total amount (F/P) that must be paid back?
a) What is the number of time periods (n) , rate of interest (i), per period of time, should be used in solving this problem?
b) Is the present single amount of money (P) known? (Yes, No)
c) Which time value factor should be used to solve this problem?
d) How much of the total amount repaid represents interest?