Question

You have just borrowed $30,000 from the Satisfaction Auto Corp. to purchase a new car. You will be making monthly payments of $750. Your interest rate is 6 percent compounded monthly. How many months will it take you to pay off the loan? Multiple Choice 45.95 Months 44.74 Months 40 Months

Answer 1

It will take approximately 44.74 months to pay off the loan.

Step-by-step explanation:

To calculate the number of months it will take to pay off a loan, we can use the formula for the number of periods in compound interest:

n = -(log(1-((r * PV)/PMT))/log(1+r))

In this formula, n represents the number of periods (in this case, months), r represents the interest rate per period (6% divided by 12 months), PV represents the present value or loan amount ($30,000), and PMT represents the monthly payment ($750).

Plugging in these values:

n = -(log(1-((0.06/12) * 30000)/750))/log(1+(0.06/12)))

Calculating this equation gives us n ≈ 44.74 months.

Therefore, it will take approximately 44.74 months to pay off the loan.