Question

Melody bought a used Toyota Prius for $18995. She put $2000 down and financed the rest for 60 moths at 7 and half percent. Find her monthly payment.

Answer 1

The amount that Melody financed is the difference between the price of the car and her down payment:

$18,995 - $2,000 = $16,995

The interest rate is 7.5% per year, or 0.625% per month (since there are 12 months in a year). The number of payments is 60, so we can use the formula for the monthly payment on a loan:

This is the formula we will be using today:

P = (r(PV)) / (1 - (1 + r)^(-n))

where:

P is the monthly payment

r is the monthly interest rate

PV is the present value of the loan (the amount financed)

n is the number of payments

Plugging in the values:

P = (0.00625(16995)) / (1 - (1 + 0.00625)^(-60))

P = 327.51

So Melody's monthly payment is $327.51.