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Jody is planning to buy a car for $20,000, putting 20% down in cash, with the...

Jody is planning to buy a car for $20,000, putting 20% down in cash, with the rest going towards a loan. The bank tells her that the interest rate on the loan will be 8% per year, which is then compounded monthly, for a three-year loan. What is Jody’s monthly payment going to be?

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Expert Solution

Loan Amount = Purchase Price * (1 - Downpayment)

= $20,000 * (1 - 0.20) = $16,000

Monthly Payment = [Loan Amount * r] / [1 - (1 + r)-n]

= [$16,000 * (0.08/12)] / [1 - {1 + (0.08/12)}-(3*12)]

= $106.67 / 0.2127

= $501.38

jeff jeffy answered 2 years ago
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