Question

a woman decides to purchase a $23,800 car and makes a down payment of $3,500. she arranges to borrow the remainder from a bank that will charge her 4.5% interest. she will make monthly payments for 4 years. a. find her monthly payment amount.

Answer 1

The monthly payment amount a woman has to pay for the car is $462.91.

Here we have to find the monthly payment amount.

The cost of car = $23,800

Down payment = $3,500

Rate(r) = 4.5%

time(t) = 4 years

Periodic interest(i) = 0.045/12

Formula to calculate monthly payment:

A = P i( 1 + i$)^{n}$ / ( 1 + i$)^{n}$ - 1

Loan amount = 23800 - 3500

                      = $ 20300

A = 20300 ( 0.045 /12 ( 1 + 0.045/12$)^{48}$)/ (1 + 0.045/12$)^{48}$ - 1

  = 20300× 0.004488 / 0.196814

  = 462.91

Therefore the monthly payment is $462.91.

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