You are buying a previously owned car today at a price of $6,890. You are paying $500 down in cash and ﬁnancing the balance for 36 months at 7.9%. What is the amount of each loan payment?

Question

Quizplus · Accepted Answer

To calculate the loan payment, we can use the formula:
Payment = (P * r) / (1 - (1 + r)^(-n))
where
P = principal amount = $6,390 - $500 = $6,390
r = interest rate per period = 7.9% / 12 months = 0.0065833
n = total number of periods = 36 months

Putting the values in the formula, we get:
Payment = (6390 * 0.0065833) / (1 - (1 + 0.0065833)^(-36))
Payment = $199.94

Therefore, the best choice is B.

You Are Buying a Previously Owned Car Today at a Price