Question

You want to buy a car, and a local bank will lend you $10,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 11% with interest paid monthly. What will be the monthly loan payment?

Answer 1

The monthly loan payment will be approximately $214.80.

Step-by-step explanation:

To find the monthly loan payment, we can use the formula for calculating the monthly payment for an amortized loan. The formula is:

Monthly Payment = P * r * (1 + r)^n / ((1 + r)^n - 1)

Where P is the principal loan amount, r is the monthly interest rate, and n is the total number of payments. In this case, P = $10,000, r = 11% / 12 = 0.11 / 12 = 0.00917, and n = 60. Substituting these values into the formula, we get:

Monthly Payment = $10,000 * 0.00917 * (1 + 0.00917)^60 / ((1 + 0.00917)^60 - 1) ≈ $214.80

Therefore, the monthly loan payment will be approximately $214.80.