Question

today you are purchasing a new car for $28000 you plan to put $2000 down and finance the balance with a 5-year 5.5% loan with monthly payments what is the amount of each payment

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:

= 5.5% / 12

= 0.458333333%

n is computed as follows:

= 5 year x 12 months

= 60

So, the monthly payments is computed as follows:

$ 28,000 - $ 2,000 = Monthly payment x [ (1 - 1 / (1 + 0.004583333)⁶⁰ ) / 0.004583333 ]

$ 26,000 = Monthly payment x 52.35283925

Monthly payment = $ 26,000 / 52.35283925

Monthly payment = $ 496.63

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