Académique Documents
Professionnel Documents
Culture Documents
Introduction:
The car chosen to be financed was the 2017 Tesla Model S 100D. The car will be
purchased for $92,500, not including sales tax, from Tesla’s official website and supplier. The
car will have 6% sales tax, a 20% down payment, and a five-year loan will be instated to pay off
the debt of purchasing it. From Tesla’s website, the loan interest is set at 1.49 APR (annual
percentage rate). This car was chosen because of the overall quality and luxury included in a
Tesla licensed product such as highway autopilot features, electric all-wheel drive, and interior
Figure 1 showcases the Tesla Model S 100D driving on a highway using its automated
Part A:
The monthly payments can be calculated in multiple ways, including the original
𝑃(1 + 𝑟)𝑛 ∗ 𝑟
𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 =
(1 + 𝑟)𝑛 − 1
Figure 2. Monthly Payment Formula
Figure 2 shows a formula that can be used to find the monthly payment of a loan if the
principle(P), monthly interest rate(r), and the amount of payments(n) are already known.
month loan. The monthly interest rate was found by dividing the APR of 1.49 by 12 and
changing it to decimal format to convert it to a monthly basis. The principal was found by first
adding the 6% sales tax to the original price of the Tesla Model S 100D and then removing the
20% down payment from the total price to find the actual loan amount. The monthly payment to
pay back the $78,440 loan over 5 years was found to be approximately $1357.45.
payment amount. The formula requires the amount of payments, APR, principal, amount due at
the end, payments per year, and compoundings per year. The monthly payment was confirmed to
be $1357.45.
Doerr 3
Part B:
The statistics of each payment and the total amounts can be calculated by using formulas
Table 1 showcases the total amount paid for the car, interest amounts, and principal
amounts for each payment. The principal amounts were found by adding the interest amount to
Doerr 4
the corresponding principal amount and then subtracting the payment amount. The interest
amounts were found by multiplying the monthly interest rate of 0.0012 by the corresponding
principal amount. The total amount paid was then calculated by adding the sums of the payments
𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙: 𝑝1 = 𝑝1 + 𝑐1 − 𝑑1
𝑝𝑛 = 𝑝𝑛+cn-dn
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡: 𝐼1 = 𝑏1 ∗ 0.0012
𝐼𝑛 = 𝑏𝑛 ∗ 0.0012
Figure 5. Recursive and Explicit Formulas
Figure 5 shows the formulas for each column to calculate the interest and principal
Doerr 5
Part C:
Depending on the circumstances of the loan payments, the overall amount paid and saved
can be changed.
Table 2 shows the new amounts for the original payment added to 10% of itself. It would
take only 55 payments or 55 months to pay off the loan with the new payment amount. $281.10
Doerr 6
of interest would be saved with the new payment amount too. This was found by subtracting the
Part D:
Table 3. Statistics of a 3-Year Loan Payment
Doerr 7
Table 3 shows the new amounts and statistics for a 3-year loan. The new payment for the
3-year loan is $2229.30 which was found by using the formula featured in figure 2. The interest
rate stays the same at 1.49% annually. The new total for this loan is $84229.00 which saves
approximately $154.82 when compared to the previous 5-year loan amount of $84453.80.
Conclusion:
If this car was bought, then the smartest decision to finance the loan would be the 3-year
loan. This loan is significantly cheaper than the other two choices because even though it has a
higher payment cost, the overall amount of payments is lowered which results in lower interest
because not as many payments exist to have interest on. The activity has shown the importance
of mathematics in a real-life situation and to always research a topic before becoming involved
into it.