Question

What is the minimum payment amount Walter will need to make for his car loan

Answer 1

Step 1

State the formula for compound interest compounded monthly.

`A=p(1+(r)/(n))^(nt)`

Where

`\begin{gathered} A=\text{ miminum payment amount} \\ p=\text{ principal= \$}36,950 \\ r=\text{ monthly rate= }(3.25)/(100)=0.0325 \\ n=\text{ Number of times of compounding annually = 12} \\ t=\text{ Period for payment of loan =}5\text{ years} \end{gathered}`

Step 2

Find the amount

`A=36950(1+(0.0325)/(12))^(12*5)`
`A=36950(1.002708333)^(60)`

Hence the minimum amount Walter will need to make for his car loan is