You buy a motorcycle for $52 523 plus freight of $724 and other delivery charges of $561. You have saved 25% of the total purchase price towards a down payment. The bank is willing to finance the purchase of the motorcycle at 9.86% compounded quarterly. What is the size of your monthly payment if the loan is for 4.5 years?

Question

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First, calculate the total purchase price: $52,523 + $724 + $561 = $53,808. The down payment is 25% of this, so $53,808 * 0.25 = $13,452. The amount to be financed is $53,808 - $13,452 = $40,356. The loan term is 4.5 years, or 54 months, and the interest rate is 9.86% compounded quarterly. Using the formula for monthly payments on a compound interest loan, or a financial calculator, the monthly payment can be calculated to be approximately $926.80.

You Buy a Motorcycle for $52 523 Plus Freight of $724