You are considering purchasing a new truck that will cost you $34 000. The dealer offers you 1.9% APR financing for 48 months (with payments made at the end of the month). Assuming you finance the entire $34 000 and finance through the dealer, your monthly payments will be closest to:

Question

Quizplus · Accepted Answer

To calculate monthly payments, we can use the formula:

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

Where:
M = monthly payment
P = principal (amount borrowed) = $34,000
i = monthly interest rate = APR/12 = 1.9%/12 = 0.00158
n = total number of payments = 48

Plugging in these values, we get:

M = 34,000 [ 0.00158(1 + 0.00158)^48 ] / [ (1 + 0.00158)^48 – 1 ]

M = $736 (rounded to the nearest dollar)

Therefore, the best choice is C, with a monthly payment of approximately $736.

You Are Considering Purchasing a New Truck That Will Cost