Question

Terry decided to purchase a vehicle priced at $15,999 MSRP with a 4% interest rate for 6 years. The dealership offered her a $1700 cash-back incentive, which she accepted. What will be her approximate monthly payment for the vehicle, considering these factors?

A) $230 per month
B) $260 per month
C) $320 per month
D) $350 per month

Answer 1

To find Terry's monthly vehicle payment, the cash-back incentive is subtracted from the MSRP to find the loan amount, then a loan payment formula or calculator is used with the loan amount, annual interest rate divided by 12 for monthly rate, and a 6-year term to find the monthly payment.

Step-by-step explanation:

To determine Terry's approximate monthly payment for the vehicle, we can use the formula for calculating loan payments. Firstly, let's subtract the cash-back incentive of $1,700 from the vehicle's MSRP which is $15,999 to get the initial loan amount. So, $15,999 - $1,700 = $14,299.

Now, we need to calculate the monthly payment using the loan amount, interest rate, and loan duration. The formula for the monthly payment (M) of a fixed-rate loan is M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1], where:

• P is the principal amount (loan amount), which is $14,299.
• r is the monthly interest rate, which is (4% per year / 12 months) = 0.003333.
• n is the total number of payments (loan term in months), which is 6 years * 12 months/year = 72 months.

Using these values, we can calculate Terry's approximate monthly payment. However, since we can't include full mathematical calculations here, we'd typically input these values into a loan calculator to determine the exact monthly payment.