You borrow $5,600 to buy a car. The terms of the loan call for monthly payments for four years at a 5.9% rate of interest. What is the amount of each payment?

Question

Quizplus · Accepted Answer

To find the monthly payment, use the formula for an amortizing loan: P = [r*PV] / [1 - (1 + r)^-n], where P is the monthly payment, r is the monthly interest rate, PV is the present value or loan amount, and n is the total number of payments. Here, r = 5.9%/12 = 0.00491667, PV = $5,600, and n = 48. Plugging these values into the formula gives a monthly payment of approximately $131.26.

You Borrow $5,600 to Buy a Car