Calculate the annual car payment for a car loan of $20,000 at 5% interest rate over five years.
A) $4,619.50
B) $4,000
C) $4,520
D) $419.32

Question

Quizplus · Accepted Answer

The annual car payment can be calculated using the formula for an installment loan payment. The formula is P = [r*PV] / [1 - (1 + r)^-n], where P is the payment, r is the monthly interest rate (annual rate divided by 12), PV is the present value or loan amount, and n is the total number of payments (months). For a $20,000 loan at 5% interest over five years (60 months), the monthly payment is calculated first, and then multiplied by 12 to get the annual payment. The correct calculation results in an annual payment of approximately $4,619.50.

Calculate the Annual Car Payment for a Car Loan of $20,000