You wish to buy a $20,000 car. The dealer offers you a 5-year loan with an 8 percent APR. What are the monthly payments?

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a loan, you can use the formula for a fixed-rate loan which is often represented as $PMT = P \times \frac{r(1+r)^n}{(1+r)^n - 1}$, where $P$ is the principal amount ($20,000), $r$ is the monthly interest rate (annual rate divided by 12, so 0.08/12 = 0.0066667), and $n$ is the total number of payments (5 years x 12 months = 60 payments). Plugging these values into the formula gives a monthly payment of approximately $405.53.

You Wish to Buy a $20,000 Car