You need to borrow $18,000 to buy a truck. The current loan rate is 9.9% compounded monthly and you want to pay the loan off in equal monthly payments over ﬁve years. What is the size of your
Monthly payment?

Question

Quizplus · Accepted Answer

Using the formula for monthly payments on a loan:  𝑃𝑀𝑇 = 𝑃𝑉 * ((𝑟/12)/(1 − (1 + 𝑟/12)^(−𝑛))) where PMT is the monthly payment, PV is the present value (loan amount), r is the monthly interest rate, and n is the total number of payments.

Plugging in the given values: 
PMT = 𝑃𝑉 * ((0.099/12)/(1 − (1 + 0.099/12)^(−60)))
PMT = 18000 * ((0.099/12)/(1 − (1 + 0.099/12)^(−60)))
PMT = $381.56

Therefore, the answer is C.

You Need to Borrow $18,000 to Buy a Truck