When you purchased a car, you borrowed $20,000 from the bank at 9.20% and agreed to make monthly payments for 3 years. What is your monthly payment?
A) $153.33
B) $637.86
C) $584.12
D) $559.78

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a loan, you can use the loan payment formula: $PMT = \frac{P \times r}{1 - (1 + r)^{-n}}$, where $P$ is the principal amount ($20,000), $r$ is the monthly interest rate (annual rate divided by 12, so 9.20% / 12 = 0.767% or 0.00767 as a decimal), and $n$ is the total number of payments (3 years x 12 months = 36 payments). Plugging these values into the formula gives a monthly payment of approximately $637.86.

When You Purchased a Car, You Borrowed $20,000 from the Bank