You decide to take out a car loan for $34,575 at 4% APR for 72 months.How much are your monthly payments?
A)$480.21
B)$540.93
C)$1,470.30
D)$549.63
E)$499.42

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a car loan, you can use the formula for an installment loan: $M = P \frac{r(1+r)^n}{(1+r)^n - 1}$, where $M$ is the monthly payment, $P$ is the principal amount ($34,575), $r$ is the monthly interest rate (APR/12, so 4%/12 = 0.0033), and $n$ is the total number of payments (72). Plugging in the values: $M = 34575 \frac{0.0033(1+0.0033)^{72}}{(1+0.0033)^{72} - 1}$, calculating this gives a monthly payment of approximately $540.93.

You Decide to Take Out a Car Loan for $34,575