Question

Stephanie Curry found a car loan with an APR of 5.63% and compounded monthly. The car cost $23,500 and required a 10% ($2,350) down payment. How much must Stephanie pay at the end of each month if she plans to pay the car off in 7 years?

A) $310.47
B) $327.12
C) $318.85
D) $342.10

Answer 1

To calculate the monthly payments on a car loan, we can use the amortizing loan formula. Plugging in the given values, the monthly payment comes out to be approximately $327.12.

Step-by-step explanation:

To calculate the monthly payments on a car loan, we can use the formula for the monthly payment on an amortizing loan. The formula is:

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

Where:
- Principal is the loan amount
- r is the monthly interest rate (APR/12)
- n is the total number of payments (years * 12)

In this case, the principal is $23,500 - $2,350 = $21,150. The monthly interest rate is 5.63%/12 = 0.00469. And the total number of payments is 7 years * 12 = 84.

Plugging these values into the formula, we get:

Monthly Payment = $21,150 * (0.00469(1+0.00469)^84) / ((1+0.00469)^84 - 1)

Calculating this expression, the monthly payment comes out to be approximately $327.12. Therefore, the correct answer is B) $327.12.