Question

Calculate the monthly payment for a 5-year car loan of $23,570 at 10. 43% interest, compounded monthly. A. $247. 44 b. $337. 56 c. $433. 88 d. $505. 79 Please select the best answer from the choices provided A B C D.

Answer 1

d. $505.79

Explanation:

The payment amount is given by the amortization formula:

A = P(i/12)/(1 -(1 +i/12)^(-12t))

A is the monthly payment, P is the principal value of the loan, i is the annula interest rate, and t is the number of years.

For this loan, we have ...

P = $23,570

i = 0.1043 . . . . . percentage expressed as a decimal

t = 5

So the monthly payment is calculated to be ...

A = $23,570(0.1043/12)/(1 -(1 +0.1043/12)^(-12·5))

A ≈ $204.8626/(1 -1.00869167^-60) = $204.8626/(1 -0.5949686)

A ≈ $505.7943 ≈ $505.79