A car dealer offers you a loan with no interest charged for the term of three years. If you need to borrow $15,000, what will your monthly payment be?

Question

Quizplus · Accepted Answer

To calculate the monthly payment, we can use the formula for the present value of an annuity:
PMT = PV * i / (1 - (1 + i)^-n)
Where PMT is the monthly payment, PV is the present value (loan amount), i is the interest rate per month, and n is the number of monthly payments (term). Since there is no interest, i is equal to 0. Therefore:
PMT = 15000 * 0 / (1 - (1 + 0)^-36)
PMT = 15000 / 36
PMT = $416.67
So, the best choice is A, with a monthly payment of $416.67.

A Car Dealer Offers You a Loan with No Interest