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The MacDonald will need a new tractor for the farm. A suitable tractor was found at...

The MacDonald will need a new tractor for the farm. A suitable tractor was found at the local John Deere outlet and the cost is $60,000. If the tractor is to be financed at 6.996 percent over 8 years, what are the monthly payments for the tractor?

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Answer #1

Monthly Loan Payment for the Tractor

Loan Amount (P) = $60,000

Monthly Interest Rate (n) = 0.5830% [6.996% / 12 Months]

Number of months (n) = 96 Months [8 Years x 12 months]

Monthly Loan Payment = [P x {r (1+r)n} ] / [( 1+r)n – 1]

= [$60,000 x {0.00583 x (1 + 0.00583)96}] / [(1 + 0.00583)96 – 1]

= [$60,000 x {0.00583 x 1.7472705}] / [1.7472705 – 1]

= [$60,000 x 0.0101866] / 0.7472705

= $611.20 / 0.7472705

= $817.90 per month

“Hence, the Monthly Loan Payment for the Tractor will be $817.90 per month “

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