Question

You purchase a Dodge Ram that has a sticker price of $20,650 at 4.5% interest rate for 4 years.What is the Monthly Payment Amount?

Answer 1

470.89 per month

Explanation

Step 1

Let

$\begin{gathered} \text{ Principal=P}=20650 \\ Number\text{ of payments= 4}8=\text{ 4 }\cdot12=\text{ 48 monthly payment} \\ Interest\text{ rate=4.5 \% (per year)} \\ Interest\text{ rate(month)=4.5/12=0.375} \\ \end{gathered}$

Now, to calculate the payment amount per month we need to use, this expression

$\begin{gathered} A=P\frac{(1+r)^n}{(1+r)^n-1} \\ \text{replace} \\ A=20650\frac{(1+0.375)^{48}}{(1+.375)^{48}-1} \\ A=20650\frac{(1.375)^{48}}{(1.375)^{48}-1} \\ A=20650\frac{1.340423584}{2.574462891} \\ A=20650\frac{1.340423584}{2.574462891} \\ A=470.89 \\ \end{gathered}$

I hope this helps you