You are buying a previously owned car today at a price of $4,950. You are paying $750 down in cash and ﬁnancing the balance for 42 months at 8.45%. What is the amount of each loan payment?

Question

Quizplus · Accepted Answer

The amount that needs to be financed is: 
$4,950 - $750 = $4,200.

The formula to calculate loan payments is:

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

where:
P = loan payment 
r = monthly interest rate 
A = amount financed 
n = number of payments

Monthly interest rate = 8.45% / 12 = 0.00704
Number of payments = 42

Plugging in the values, we get:

P = (0.00704 * 4,200) / (1 - (1 + 0.00704)^-42) = $115.86

Therefore, the amount of each loan payment is $115.86, which corresponds to choice C.

You Are Buying a Previously Owned Car Today at a Price