WRITTEN CRITIQUE

Running head : ARTICLE CRITIQUE

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Answer 1

The longer the period of the loan the more the amount of interest that is supposed to be paid . This is because interest is calculated on an annual basis . Thus if loan for 10 ,000 is taken for 1 year at a 10 rate of interest then the be the principal plus the amount of interest . In this case 10 ,000 10 1 ,000

If the same loan was taken for four years at the same rate and at simple

br interest (as opposed to compound interest ) then the result will be as shown below

Interest on 10 .000 for 1 year at 10 1 ,000

For four years the interest will be Years (loan amount interest 4 10 ,000 10 4 1 ,000 4 ,000

4 ,000 14 ,000

The amount of loan one takes will depend on the amount of down payment one has made . For example if in the above scenario the car the car is 10 ,000 and a down payment of 3 .500 is made then the amount due will be 6 ,500 . Thus if a loan were to be sourced it would be for 6 ,500 and not 10 ,000 . To calculate the interest due on the loan assuming that the rate remains constant , then : the amount due at the end of one year will be :If the down payment was 5 ,000 the balance due would then be 5 ,000 To calculate the interest on the loan and the end of one year then

As seen from the above examples the larger the down payment , the lower the interest charges on the loan applied for . This would still apply if the loan had an element of zero interest payment for some years

Answer 2

Scenario A

Loan amount 20 ,000 rate of interest 3 .9 duration of the loan 4 years

To calculate the br Scenario B

The balance of 18 ,500 . To calculate the amount due at the end of the loan period then :From the above calculations , scenario A is the cheaper of the alternatives Answer 3

Car dealers have a percentage profit markup that they can adjust either upwards or downwards depending on the cost price . If one can negotiate effectively , then the dealer is likely to offer better terms . Thus not only should a potential buyer look around for options , but also compare all the financial implications before making the final decision . As shown in answer 2 , the difference of same . However the strain of getting the interest is what makes the major difference

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