Christine has just purchased a used Mercedes for $18,995. She plans to make a $2,500 down payment on the new car. What is the amount of her monthly payment on the remaining loan if she must pay 12% annual interest on a 24-month car loan?

Question

Quizplus · Accepted Answer

First, we need to calculate the amount of the loan. Since Christine made a $2,500 down payment, the amount of the loan is:

Loan amount = purchase price - down payment
Loan amount = $18,995 - $2,500
Loan amount = $16,495

Next, we need to calculate the monthly payment on the loan. We can use the following formula to calculate the monthly payment:

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

Where:
P = monthly payment
r = monthly interest rate (annual interest rate divided by 12)
A = loan amount
n = total number of payments (number of years times 12)

In this case, r = 0.12/12 = 0.01, A = $16,495, and n = 24. Plugging in these values, we get:

P = (0.01 * $16,495) / (1 - (1 + 0.01)^(-24))
P = $776.48

Therefore, the amount of Christine's monthly payment on the loan is $776.48. The best choice is B.

Christine Has Just Purchased a Used Mercedes for $18,995