You are considering purchasing a new car that will cost you $28,000. The dealer offers you 4.9% APR financing for 60 months (with payments made at the end of the month). Assuming you finance the entire $28,000 and finance through the dealer, your monthly payments will be closest to:

Question

Quizplus · Accepted Answer

To calculate the monthly payment, we need to use the formula:

Payment = (P * r * (1+r)^n) / ((1+r)^n - 1)

Where:
P = principal amount borrowed (in this case, $28,000)
r = monthly interest rate (APR divided by 12: 4.9% / 12 = 0.4083%)
n = total number of payments (60)

Plugging in the numbers, we get:

Payment = ($28,000 * 0.004083 * (1+0.004083)^60) / ((1+0.004083)^60 - 1) = $527.24

Therefore, the closest monthly payment to $527 is choice A.

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