Question

You wish to buy a $27,500 car. The dealer offers you a 6-year loan with a 7.2 percent APR. What are the monthly payments?

Answer 1

Answer:

$471.49  

Explanation:

The formula for computing the monthly payment is shown below:

PMT=P(r/n)/1-(1+r/n)^(-nt)

P=loan amount=$27,500

r=interest rate=7.2%

n=number of monthly payments in a year=12

t= duration of loan=6 years

PMT=27500*(7.2%/12)/(1-(1+7.2%/12)^(-6*12)

PMT=27500*0.6000% /(1-(1+0.6000%)^-72

PMT=165 /(1-0.650047943 )

PMT=$471.49