Question

You want to buy a car, and a local bank will lend you $10,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 7% with interest paid monthly. What will be the monthly loan payment

Answer 1

PMT = $603.44

Step-by-step explanation:

Given that:

• Your loan: $10,000 (P)
• n = 5 years = 5*12 = 60 months
• Interest rate: 7% /12= 0.7/12

As we know, the formula to find payment per period is:

PMT =
`P(i(1+i)^n)/((1+i)^n-1)`

<=> PMT =
`10000(0.7/12(1+0.7/12)^60)/((1+0.7/12)^60-1)`

<=> PMT = $603.44

Hope it will find you well.