Question

You purchase a Dodge Ram that has a sticker price of $20,650 at 4.5% interest rate for 4 years.What is the Monthly Payment Amount?

Answer 1

470.89 per month

Step-by-step explanation

Step 1

Let

`\begin{gathered} \text{ Principal=P}=20650 \\ Number\text{ of payments= 4}8=\text{ 4 }\cdot12=\text{ 48 monthly payment} \\ Interest\text{ rate=4.5 \% (per year)} \\ Interest\text{ rate(month)=4.5/12=0.375} \\ \end{gathered}`

Now, to calculate the payment amount per month we need to use, this expression

`\begin{gathered} A=P((1+r)^n)/((1+r)^n-1) \\ \text{replace} \\ A=20650((1+0.375)^(48))/((1+.375)^(48)-1) \\ A=20650((1.375)^(48))/((1.375)^(48)-1) \\ A=20650(1.340423584)/(2.574462891) \\ A=20650(1.340423584)/(2.574462891) \\ A=470.89 \\ \end{gathered}`

I hope this helps you