Question

Khloe is buying a car and needs to take out a loan for $25, 000. The bank is offering an annual interest rate of 4.2%, compounded monthly, for a 6 year loan. Using the formula below, determine her monthly payment, to the nearest dollar.

Answer 1

The answer is $391 to the nearest dollar.

4.2% / 100= 0.042
0.042 / 12= 0.0035

6 years * 12 months = 72 payments

P= 25,000 * (0.0035(1+0.0035)^72) / ((1+0.0035)^72-1

P= $391.34

To the nearest dollar: $391