Answer:
(a) $668.39
(b) $634.93
(c) $618.20
(d) $584.74
Explanation:
Monthly Payment Formula
where:
- PMT = monthly payment.
- P = loan amount.
- i = interest rate per month (in decimal form).
- n = term of the loan (in months).
Given:
- P = $39.950 less any down payment.
- i = 10.25% / 12 = 0.1025/12
- n = 7 years = 7 × 12 = 84 months
Part (a)
Down payment = $0
⇒ P = $39,950
Therefore, the monthly payment is $668.39.
Part (b)
Down payment = $2,000
⇒ P = $39,950 - $2,000 = $37,950
Therefore, the monthly payment is $634.93.
Part (c)
Down payment = $3,000
⇒ P = $39,950 - $3,000 = $36,950
Therefore, the monthly payment is $618.20.
Part (d)
Down payment = $5,000
⇒ P = $39,950 - $5,000 = $34,950
Therefore, the monthly payment is $584.74.