Question

Wade Ellis buys a new car for $16,824.89. He puts 10% down and obtains a simple interest amortized loan for the rest at 11 1/2% interest for four years. (Round your answers to the nearest cent.) Find his monthly payment.

Answer 1

To find Wade Ellis' monthly payment, calculate the loan amount after the down payment and then determine the monthly payment using the simple interest formula. The monthly payment is approximately $407.46.

Step-by-step explanation:

To find Wade Ellis' monthly payment for the car loan, we need to calculate the loan amount after the down payment, and then determine the monthly payment using the simple interest formula.

Step 1: Calculate the loan amount after the down payment:
Loan amount = Car price - Down payment
Loan amount = $16,824.89 - (10% of $16,824.89)
Loan amount = $16,824.89 - $1,682.49 = $15,142.40

Step 2: Calculate the monthly payment using the simple interest formula:
Monthly payment = (Loan amount * Interest rate * (1 + Interest rate) ^ Number of months) / ((1 + Interest rate) ^ Number of months - 1)
Where:
- Loan amount is $15,142.40
- Interest rate is 11.5% per year or 0.115
- Number of months is 4 years * 12 months = 48 months

Plugging in the values:
Monthly payment = ($15,142.40 * 0.115 * (1 + 0.115) ^ 48) / ((1 + 0.115) ^ 48 - 1)

Simplifying the equation gives the monthly payment to be approximately $407.46.