In: Finance
Your dream car is selling at $250,000, you are plan to finance it for five years at annual rate of 6% compounded monthly. If the first payment is due in one month, the monthly payment is closet to:
4,945.76
4,833.20
4,289.08
4,166.67
The solution is 4833.20
Equated Monthly Installment = P * r *[ (1+r)n / ((1+r)n - 1) ]
where,
P= Principal Loan Amount
r= rate of interest calculated on monthly basis
n= loan term / tenure / duration in number of months
Here,
P = $250000
r = 6/12 = 0.5%
n = 12*5 = 60 months
Applying the values,
EMI = 250000 * 0.5% [ (1+ 0.5%)60 /(( 1+ 0.5%)60 - 1)]
= 1250* [ 3.86656]
= 4833.2