Loan Payments You wish to buy a $15,000 car.The dealer offers you a 4-year loan with a 9 percent APR.What are the monthly payments?

Question

Quizplus · Accepted Answer

To calculate the monthly payment, we can use the following formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where M is the monthly payment, P is the principal (the amount borrowed), i is the monthly interest rate (which is the annual interest rate divided by 12), and n is the total number of payments (which is the number of years multiplied by 12).

Plugging in the values, we get:

M = 15000 [ 0.0075(1 + 0.0075)^48 ] / [ (1 + 0.0075)^48 – 1]

M = $373.28

Therefore, the best choice is C.

Loan Payments You Wish to Buy a $15,000 Car