Question

Shane has taken Out a $20,000 car loan with a 6% APR, Compounded monthly. The loan is for 5 years.

Calculate the Monthly Installment. $

Answer 1

Monthly installment is $386.6560

Explanation below:-

Given,

Car loan = $20,000

Rate of interest = 6%APR(annua percent rate)

Time = 5years

Here, We have to find the monthly installment and it can be found by the following formula:-

Present value of annuity (PV) = C * [(1 - (1 + r)^-n) / r]

Here,

C = annuity payment = TO FIND

r = Rate of interest = 6%APR

To calculate the minthly rate We have to divide the APR by 12(To actually convert it into month)

= 6% / 12

= 0.005

n = Number of years = 5

To calculate the monthly installment multiply the years with 12(to actully convert years into months as a year has 12 months)

Number of months = 12 * 5 = 60 months