Question

You are going to borrow $40,000 for a new car. Determine the monthly payment for the...

You are going to borrow $40,000 for a new car. Determine the monthly payment for the following situation:

I. A 48-month loan, 6.85% annual interest rate

II. A 60-month loan, 6.59% annual interest rate

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Homework Answers

Answer #1

I.Information provided:

Present value=  $40,000

Time= 48 months

Monthly interest rate= 6.85%/12= 0.5708%

The monthly payment is calculated by entering the below in a financial calculator:

PV= -40,000

N= 48

I/Y= 0.5708

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 955.07.

Therefore, the monthly payment is $955.07.

II.Information provided:

Present value=  $40,000

Time= 60 months

Monthly interest rate= 6.59%/12= 0.5492%

The monthly payment is calculated by entering the below in a financial calculator:

PV= -40,000

N= 60

I/Y= 0.5492

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 784.33.

Therefore, the monthly payment is $784.33.

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