Question

1. Elissa is buying a new car. She has an excellent credit score of

822. She is able to get a low interest rate of 2.25% and will
have a down payment of $4,000 on a car that costs $19,500.
Calculate her monthly payments for a 5-year loan.

Answer 1

$273.38 per month

Explanation:

Monthly Payment Formula

`\sf PMT=(Pi(1+i)^n)/((1+i)^n-1)`

where:

• PMT = monthly payment
• P = loan amount
• i = interest rate per month (in decimal form)
• n = term of the loan (in months)

Given:

• P = $19,500 - $4,000 = $15,500
• i = 2.25% / 12 = 0.0225 / 12
• n = 5 years = 60 months

`\implies \sf PMT=(15500 ((0.0225)/(12))(1+(0.0225)/(12))^(60))/((1+(0.0225)/(12))^(60)-1)`

`\implies \sf PMT=273.3788438`

`\implies \sf PMT=\$273.38`