Madison purchased a new car for $23,000. She was allowed $3,000 for her trade in and financed the remainder over 48 months at a rate of 4% per year. How much is her monthly payment?
A) $451.58
B) $519.32
C) $384.91
D) $459.15

Question

Quizplus · Accepted Answer

To find the monthly payment, we use the formula for an amortizing loan: M = P[r(1+r)^n]/[(1+r)^n – 1], where P is the principal ($20,000 after trade-in), r is the monthly interest rate (0.04/12), and n is the number of payments (48). Plugging in these values gives a monthly payment of approximately $451.58.

Madison Purchased a New Car for $23,000