Question

9. Suppose you take out a car loan for $9999 for 4 years at a 7.5% interest rate. What is your

monthly payment?

Answer 1

241.76

Explanation:

Answer 2

The monthly payment is $241.76.

Explanation:

Given : Suppose you take out a car loan for $9999 for 4 years at a 7.5% interest rate.

To find : What is your monthly payment ?

Solution :

The formula to find monthly payment is

`M=\frac{\text{Amount}}{\text{Discount factor}}`

Discount factor is
`D=(1-(1+i)^(-n))/(i)`

Substitute in the formula,

`M=(A)/((1-(1+i)^(-n))/(i))`

`M=(A* i)/(1-(1+i)^(-n))`

where, A is the amount A=$9999

r is the rate =7.5%=0.075

`i=(r)/(12)=(0.075)/(12)=0.00625`

time t=4 years

Time in months
`n=t* 12=4* 12=48`

Substitute all the values in the formula,

`M=(9999* 0.00625)/(1-(1+0.00625)^(-48))`

`M=(62.49375)/(1-(1.00625)^(-48))`

`M=(62.49375)/(1-0.7415101)`

`M=(62.49375)/(0.25848)`

`M=241.76`

Therefore, the monthly payment is $241.76.