Question

You purchase a new car for $44,778. You finance the purchase with a 4-year loan which consists of equal monthly payments starting next month. The interest on the loan is 4.83% APR compounded monthly. What are your monthly payments?

Answer #1

**The monthly payment is computed as shown
below:**

**Present value = Monthly payment x [ (1 – 1 / (1 +
r)**^{n}**) / r
]**

**r is computed as follows:**

= 4.83% / 12 (Since the payments are on monthly basis, hence divided by 12)

**= 0.4025% or 0.004025**

**n is computed as follows:**

= 4 year x 12 months (Since the payments are on monthly basis, hence multiplied by 12)

**= 48**

**So, the monthly payments is computed as
follows:**

$ 44,778 = Monthly payment x [ (1 - 1 / (1 +
0.004025)^{48} ) / 0.004025 ]

$ 44,778 = Monthly payment x 43.5684955

Monthly payment = $ 44,778 / 43.5684955

**Monthly payment = $ 1,027.76 Approximately**

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