Answer/ Explanation
To find the monthly payment, we need to calculate the total amount financed and then use it to determine the monthly payment using an appropriate finance formula. Here are the steps:
Step 1: Calculate the down payment:
Down Payment = 10% of Selling Price
Down Payment = 10% of $27,995
Down Payment = $2,799.50
Step 2: Calculate the amount financed:
Amount Financed = Selling Price - Down Payment
Amount Financed = $27,995 - $2,799.50
Amount Financed = $25,195.50
Step 3: Calculate the sales tax:
Sales Tax = 7.6% of Selling Price
Sales Tax = 7.6% of $27,995
Sales Tax = $2,127.72
Step 4: Calculate the license fee:
License Fee = 0.5% of Selling Price
License Fee = 0.5% of $27,995
License Fee = $139.98
Step 5: Calculate the total amount financed:
Total Amount Financed = Amount Financed + Sales Tax + License Fee
Total Amount Financed = $25,195.50 + $2,127.72 + $139.98
Total Amount Financed = $27,463.20
Step 6: Calculate the monthly interest rate:
Monthly Interest Rate = Annual Interest Rate / 12
Monthly Interest Rate = 7.6% / 12
Monthly Interest Rate = 0.0063333 (approximately)
Step 7: Calculate the monthly payment using the following formula:
Monthly Payment = (Amount Financed * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-number of months))
Monthly Payment = ($27,463.20 * 0.0063333) / (1 - (1 + 0.0063333)^(-36))
Monthly Payment = $537.81 (approximately)
Therefore, the monthly payment for financing the remaining balance over 3 years at an annual interest rate of 7.6% is approximately $537.81.