Question

You are considering buying a new, $15,000 car, and you have $2,000 to put toward a down payment. If you can negotiate an interest rate of 12% and finance the car over 60 months, what are your monthly car payments?

Answer #1

Formula for EMI is:

EMI = P × r × (1 + r)^{n} /{(1 + r)^{n} - 1
}

Where,

P = Principal= $ 15,000 - $ 2,000 = $ 13,000

r = rate of interest = 12 % p.a. or 0.12/12 = 0.01 p.m.

n = No. of periods = 60 months

EMI = $ 13,000 x 0.01 x (1 + 0.01)^{60} / {(1+ 0.01)
^{60} -1}

= $ 13,000 x 0.01 x
(1.01)^{60} / {(1.01) ^{60} -1}

= $ 13,000 x 0.01 x 1.816697/ (1.816697 -1)

= $ 13,000 x 0.01 x 1.816697/ 0.816697

= $ 13,000 x 0.01 x 2.224445

= $ 289.1778 or
**$ 289.18**

Monthly car payments is **$ 289.18**

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