Question

You are buying a gently used car today at a price of $11,480. You are paying $700 down in cash today and financing the balance for 44 months at an annual interest rate of 8.50%. What is the amount of each monthly loan payment? Dollar value

Question 7 options:

$277

$284

$291

$298

$305

Answer 1

Monthly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$                                                            10,780
Rate of interest per period:
Annual rate of interest		8.500%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.085 /12 =	0.7083%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	3.67
Total number of payments	N	3.66666666666667 × 12 =	44
Period payment using the formula	=	[ 10780 × 0.00708 × (1+0.00708)^44] / [(1+0.00708 ^44 -1]
Monthly payment	=	$                                                            286.02

Answer is 284