Question

You are negotiating to buy a new car with a car salesman at a local dealer. You have negotiated the price to $35,000. You have $5,000 to put towards the down payment and plan to get a loan for the rest. If you can get an annual interest rate of 11 percent APR (with monthly compounding) over a 5-year period, what would be your monthly payment? Round it to two decimal place (cents), e.g., 234.56.

Answer 1

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Where,

EMI= Equal Monthly Payment

P= Loan Amount

R= Interest rate per period =11%/12=0.91666667%

N= Number of periods =12*5=60

= [ $30000x0.009166667 x (1+0.009166667)^60]/[(1+0.009166667)^60 -1]

= [ $275.00001( 1.009166667 )^60] / [(1.009166667 )^60 -1

=$652.27