Question

Tiffany has decided to purchase an $11,000 car. She plans on putting $500 down toward the purchase and financing the rest at a 5.8% interest rate for 4 years. Find her monthly payment.

Option 1: $204.78
Option 2: $248.81
Option 3: $245.63
Option 4: $436.89

Answer 1

Tiffany's monthly payment for the car loan is $204.78 option 1.

Step-by-step explanation:

To find Tiffany's monthly payment, we can use the formula for calculating the monthly payment on a loan:

Monthly Payment = (Principal * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Payments))

In this case, the principal is $10,500 (the total cost of the car after the down payment), the monthly interest rate is 0.00483333 (calculated by dividing the annual interest rate of 5.8% by 12 months), and the number of payments is 48 (4 years * 12 months).

Using these numbers, we can plug them into the formula:

Monthly Payment = (10500 * 0.00483333) / (1 - (1 + 0.00483333)^(-48))

This calculation gives us a monthly payment of $204.78, which matches Option 1.