You want to buy a new car at $50K. The loan offered is at 4% per...

You want to buy a new car at $50K. The loan offered is at 4% per year for 6 years. What is the monthly payment?

Expert Solution

Answer

Explanation : To find the annuity value we use following formula

Where,
PV = Initial Amount OR Initial Deposit OR Initial Investment OR Amount at time zero

A = Regular Withdrawal Amount OR Regular Interest OR Regular Dividend OR Installment Amount

n = Number of Years/Period

r = Compound Interest Rate

r^(p)=Annual Nominal Rate of Interest

Given :

Number of Periods/Years (n) =6

Rate Of Interest (r) =4%

Present Value (PV) = $50000

Calculating Nominal Interest Rate
Nominal Interest can be calculated by following formula,

where
r=Effective Rate of Interest

r^(p)=Nominal rate of interest compounded p- times a year

Therefore,

After substituting the values into the formula we have,

Amount paid monthly

the monthly payment $780.63104.

Rahul Sunny answered 2 years ago

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