Question

Assume that you have taken out an amortized loan for $10,000 to buy a new car. The yearly interest rate is 18% and you have agreed to pay off the loan in 4 years. What is your monthly payment?

Answer 1

Answer:

  $293.75

Step-by-step explanation:

Any number of financial calculators, spreadsheets, and on-line calculators can compute the monthly payment for you. Or you can put the numbers into the formula and compute it yourself.

A formula I like is ...

  A = P(r/12)/(1 -(1 +r/12)^(-12t))

where A is the monthly payment, P is the loan amount, r is the annual interest rate, and t is the number of years. Filling in the given information and doing the arithmetic, we get ...

  A = $10000(0.18/12)/(1 -(1 +0.18/12)^(-12·4)) = $150/(1 -1.015^-48) = $293.75

Your monthly payment is $293.75.