Question

Your bank offers you a 60-month, 3% APR car loan for a $50000 new Mercedes SLK300 Roadster. What will your monthly payment be?

Answer 1

Number of payments = 60

Monthly Rate = 3/12 %

Loan Amount = 50000

We know that,

Loan Amount = Present value of all the monthly payment discounted at monthly rate.

50000 = Monthly Payment * ( 1/(1+0.03/12)^1 + 1/(1+0.03/12)^2 + 1/(1+0.03/12)^3 + 1/(1+0.03/12)^4 + 1/(1+0.03/12)^5 + ........... 1/(1+0.03/12)^60 )

50000 = Monthly Payment * 55.65

Monthly Payment = $898.43 Answer