Question

trevon had a credit score of 750. he will be bying a new oickuo that costs $38,000 with a down payment of $8,000. calculate his monthly payment plan for a 5 yr payment plan

Answer 1

To solve this problem, we are going to the loan payment formula:
`P= (( (r)/(n))PV )/(1-(1+ (r)/(n))^(-nt) )`
where

`P` is the regular payment.

`PV` is the present value.

`r` is the interest rate in decimal form.

`n` number of times the regular payment is made per year.

`t` is number of years.

As of May 2018, the new car loan rate for a credit score of 750 is 3.59%. Now, to convert the rate to decimal form, we are going to divide it by 100%:

`r= (3.59)/(100)`

`r=0.0359`.
Since the down payment is $8,000, we are going to subtract that form $38,000 to get our present value:

`PV=38000-8000`

`PV=8000`
We know that the payments are going to be monthly, so
`n=12`.
Since we are making a payment plan for 5 years,
`t=5`.

Lets replace the values in our formula:


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

`P= (( (0.0359)/(12))30000 )/(1-(1+ (0.0359)/(12))^(-(12)(5)) )`

`P= (30000( (0.0359)/(12)) )/(1-(1+ (0.0359)/(12))^(-60) )`

`P=546.96`

We can conclude that Trevor's monthly payment will be $546.96