Question

Mandy bought a car priced at ​$15,500 for​ 15% down and equal monthly payments for five years. If interest is 7​% compounded​ monthly, what is the size of the monthly​ payment?

Answer 1

Price of Car = $15,500

Down Payment = 15% * Price of Car
Down Payment = 15% * $15,500
Down Payment = $2,325

Amount Borrowed = Price of Car - Down Payment
Amount Borrowed = $15,500 - $2,325
Amount Borrowed = $13,175

Time Period = 5 years or 60 months

Annual Interest Rate = 7.00%
Monthly Interest Rate = 7.00% / 12
Monthly Interest Rate = 0.58333%

Let monthly payment be $x

$13,175 = $x/1.0058333 + $x/1.0058333^2 + … + $x/1.0058333^59 + $x/1.0058333^60
$13,175 = $x * (1 - (1/1.0058333)^60) / 0.0058333
$13,175 = $x * 50.502042
$x = $260.88

Monthly Payment = $260.88