Solve the problem using the loan payoff table or an amortization table.
-Marge and Tom Martin bought a new car for $26,500. They agreed to pay 20% down and make monthly payments for 4 years at 10% (compounded monthly)to pay off the rest. Find the amount of each monthly payment.

Question

Solve the problem using the loan payoff table or an amortization table. 
-Marge and Tom Martin bought a new car for $26,500. They agreed to pay 20% down and make monthly payments for 4 years at 10% (compounded monthly)to pay off the rest. Find the amount of each monthly payment.

Quizplus · Accepted Answer

The down payment is 20% of $26,500, which is $5,300. Therefore, the amount financed is $26,500 - $5,300 = $21,200. Using the formula for the monthly payment of a loan: $PMT = P \times \frac{r(1+r)^n}{(1+r)^n-1}$, where P = principal ($21,200), r = monthly interest rate (10%/12 = 0.00833), and n = total number of payments (4 years * 12 months/year = 48 months), the monthly payment calculates to approximately $537.63.

Solve the Problem Using the Loan Payoff Table or an Amortization