Question

You want to buy a car, and a local bank will lend you $10,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 5% with interest paid monthly. What will be the monthly loan payment

Answer 1

Answer:

$188.71

Explanation:

in order to calculate the monthly payment, we can use the present value of an annuity formula:

present value = monthly payment x annuity factor

monthly payment = present value / annuity factor

• present value = $10,000
• PV annuity factor, 60 periods, 0.4167% = 52.9913

monthly payment = $10,000 / 52.9913 = $188.7102222 = $188.71