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You want to buy a $33,000 car. The company is offering a 3% interest rate for 36 months (3 years). What will your monthly payments be?

1 Answer

1 vote

Answer:

$959.68

Explanation:

The loan amortization formula can be used to find the payment amount.

Formula

A = P(r/n)/(1 -(1 +r/n)^(-nt))

A = payment amount; P = principal borrowed; r = annual interest rate; t = number of years; n = payments per year (and number of times interest is compounded per year).

Application

For a principal amount of $33,000 at an interest rate of 3%, the 36 monthly payments will be ...

A = $33000(0.03/12)/(1 -(1 +0.03/12)^(-12·3)) ≈ $959.68

The monthly payments will be $959.68.

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