A car loan of $22,000 is financed for 3 years at an annual interest rate of 9%. Find the monthly car payment.

Question

Quizplus · Accepted Answer

The monthly car payment can be calculated using the formula for a fixed installment loan: $M = P \frac{r(1+r)^n}{(1+r)^n - 1}$, where $M$ is the monthly payment, $P$ is the principal amount ($22,000), $r$ is the monthly interest rate (annual rate divided by 12, so $0.09/12$), and $n$ is the total number of payments (3 years times 12 months/year = 36 months). Plugging in the values: $M = 22000 \frac{(0.09/12)(1+0.09/12)^{36}}{(1+0.09/12)^{36} - 1}$, calculating this gives approximately $699.59.

A Car Loan of $22,000 Is Financed for 3 Years