Final answer:
To find the monthly payment on a $23,000 loan at a 2% interest rate over 48 months, you use the loan payment formula with a monthly interest rate of 0.001667, resulting in approximately $502.62 per month.
Step-by-step explanation:
To determine the monthly payment on a $23,000 car loan with a 2% interest rate for 48 months, we need to use the formula for calculating the payment for an installment loan. This formula can be represented as PV = P * (r(1+r)^n) / ((1+r)^n - 1), where PV is the present value or the amount of the loan, P is the monthly payment, r is the monthly interest rate (annual interest rate divided by 12), and n is the total number of payments (number of years times 12).
First, we convert the annual interest rate to a monthly rate by dividing by 12: 2% annual interest rate / 12 months = 0.1667% monthly rate or 0.001667 in decimal form.
Next, we plug the values into the formula: 23,000 = P * (0.001667(1+0.001667)^48) / ((1+0.001667)^48 - 1). This calculates the monthly installment that the borrower would need to pay.
Using a calculator or spreadsheet function, such as PMT in Excel, you would find that the monthly payment equals approximately $502.62.