Question

3. Tony has decided to buy a car. The car costs $28,000. He has a downpayment of $5000. He is

going to finance the car with a 5 year loan at 8.5% interest. What will his car payment be?
(2 Points)
O $471.88
$576.46

Answer 1

Explanation:

To calculate Tony's car payment, we can use the formula for calculating monthly loan payments.

Step 1: Calculate the loan amount by subtracting the down payment from the total cost of the car: $28,000 - $5,000 = $23,000.

Step 2: Convert the interest rate to a decimal by dividing it by 100: 8.5% / 100 = 0.085.

Step 3: Divide the interest rate by 12 to get the monthly interest rate: 0.085 / 12 = 0.0070833333 (rounded to 9 decimal places).

Step 4: Calculate the number of monthly payments by multiplying the loan term in years by 12: 5 years * 12 months/year = 60 months.

Step 5: Use the formula for calculating the monthly loan payment:

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

Applying the formula to our values, we get:

Monthly Payment = ($23,000 * 0.0070833333) / (1 - (1 + 0.0070833333)^(-60)).

This results in a monthly payment of approximately $463.78.

So, Tony's car payment will be around $463.78 per month for the next 5 years