Question

Harper is considering the purchase of a $10,628 used car and is trying to decide between a 48-month and a 60-month car loan. If the loan is for $10,628 at 4 percent, what is the difference in the monthly payments?

Answer 1

The calculation of the monthly payment for a $10,628 car loan at 4 percent interest for both 48 and 60 months requires the installment loan payment formula. After calculating the monthly payment (M) for both terms, the difference in the monthly payments can be established.

Step-by-step explanation:

The difference in monthly payments for a $10,628 used car loan between a 48-month term and a 60-month term at a 4 percent interest rate can be found by calculating the monthly payment for each term using the formula for the installment loan payment.

Let's denote:

• P as the principal amount of the loan, which is $10,628.
• i as the monthly interest rate (annual rate divided by 12 months).
• n as the number of monthly payments (term of the loan in months).

The formula to calculate the monthly payment (M) is:

M = P[i(1+i)^n] / [(1+i)^n - 1]

Calculating M for both terms and then determining the difference will provide the answer.