Question

You wish to buy a $10,900 dining room set. The furniture store offers you a 2-year loan with an APR of 7.2 percent. What are the monthly payments? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Answer:

The monthly payments are $489.01

Explanation:

Monthly Payment = $\frac{P*r*(1+r)^n}{(1+r)^4-1}$

where P = Principal loan = $10,900

          r = periodic interest rate = 7.2/12 = 0.6%

          n = number of periods = 2 x 12 = 24

Substituting for the given parameters in the equation

Monthly payment = $\frac{10900 * 0.006 * (1+0.006)^{24}}{(1+0.006)^{24} - 1}$

Solving the above, = $489.01