You wish to buy a $30,000 car. The dealer offers you a 5-year loan with a 9 percent APR. What are the monthly payments? What is the monthly payment if you paid interest only?

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The monthly payment for the loan can be calculated using the formula for an installment loan: $P = \frac{rPV}{1 - (1 + r)^{-n}}$, where P is the monthly payment, r is the monthly interest rate (APR/12), PV is the present value or loan amount, and n is the total number of payments (months). For a $30,000 loan at 9% APR over 5 years (60 months), the monthly interest rate is 0.09/12 = 0.0075. Plugging these values into the formula gives a monthly payment of approximately $622.75. For an interest-only loan, the monthly payment is simply the loan amount times the monthly interest rate, which is $30,000 * 0.0075 = $225.00.

You Wish to Buy a $30,000 Car