Final answer:
To calculate the monthly payment of a car loan, use the formula for the present value of an ordinary annuity. Substituting the given values into the formula, the monthly payment for a $55,000 sports car with a 6% interest rate compounded monthly over a 60-month period is approximately $1049.14.
Step-by-step explanation:
Mathematics: Calculating the Monthly Payment of a Car Loan
To calculate the monthly payment of the car loan, we can use the formula for the present value of an ordinary annuity:
PV = PMT * ((1 - (1 + r/n)^(-n*t)) / (r/n))
Where:
PV is the present value (purchase price of the car),
PMT is the monthly payment,
r is the annual interest rate (6% or 0.06 as a decimal),
n is the number of compounding periods per year (12 for monthly compounding),
t is the total number of years (5 for a 60-month loan).
Substituting the given values into the formula, we get:
55000 = PMT * ((1 - (1 + 0.06/12)^(-12*5)) / (0.06/12))
Simplifying and solving for PMT:
PMT = 55000 / ((1 - (1 + 0.06/12)^(-12*5)) / (0.06/12))
Using a calculator or spreadsheet software, we find that the monthly payment is approximately $1049.14.