You have decided to buy a car that costs $24,600. Since you do not have a...

You have decided to buy a car that costs $24,600. Since you do not have a big down payment, the lender offers you a loan with an APR of 5.95 percent compounded monthly for 6 years with the first monthly payment due today. What is the amount of your loan payment?

Expert Solution

Number of periods = 6 * 12 = 72

Rate = 5.95% / 12 = 0.495833%

Present value = (1 + r) * Annuity * [1 - 1 / (1 + r)ⁿ] / r

24,600 = (1 + 0.00495833) * Annuity * [1 - 1 / (1 + 0.00495833)⁷²] / 0.00495833

24,600 = 1.00495833 * Annuity * [1 - 0.70039] / 0.00495833

24,600 = 1.00495833 * Annuity * 60.425538

24,600 = Annuity * 60.725148

Annuity = 405.10

Amount of loan is $405.10

jeff jeffy answered 2 years ago

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