Question

You want to buy a $23,000 car. The company is offering a 4% interest rate for 60 months (5 years). What will your monthly payments be?

Answer 1

$426.11

Step by step explanation:

To calculate your monthly car payments, you can use the formula for a fixed-rate installment loan:

PMT = [P * r * (1 + r)^n] / [(1 + r)^n - 1]

Where:

PMT = Monthly payment

P = Principal amount (the car price, which is $23,000)

r = Monthly interest rate (annual rate divided by 12)

n = Total number of payments (number of months)

First, convert the annual interest rate to a monthly rate:

r = 4% / 12 = 0.04 / 12 = 0.00333 (rounded to 5 decimal places)

Next, calculate the total number of payments:

n = 60 months

Now, plug these values into the formula:

PMT = [$23,000 * 0.00333 * (1 + 0.00333)^60] / [(1 + 0.00333)^60 - 1]

PMT ≈ [$23,000 * 0.00333 * (1.00333)^60] / [(1.00333)^60 - 1]

PMT ≈ [$23,000 * 0.00333 * 1.22033] / [1.22033 - 1]

PMT ≈ [$93.79] / [0.22033]

PMT ≈ $426.11 (rounded to the nearest cent)

So, your monthly car payments will be approximately $426.11.