Question

Landon Wallin is an auto mechanic who wishes to start his own business. He will need $4300 to purchase tools and equipment. Landon decides to finance the purchase with a 48 month fixed installment loan with an APR of 5.5%. Determine Landon’s monthly payment and Finance charge.

Answer 1

London's monthly payment $100.

Finance charge $500.

Explanation:

The formula of per month payment:

`PV=PMT((1-(1+\frac rn)^(-t))/(\frac rn))`

`I`= (PMT×t)-PV

PV= present value

PMT=Monthly payment

r= rate of interest

t=time

n= Number of interest per month

Landon Wallin needs $4300 to purchases a tool and equipment. He decides to finance the purchase with a monthly installment for 48 months.

Here,

PV=$4300, r=5.5%=0.055, t=48 months, n=12

`4300=PMT((1-(1+(0.055)/(12))^(-48))/((0.055)/(12)))`

`\Rightarrow 4300= PMT\{\frac {(1-(1+(0.055)/(12))^(-48)).12}{0.055}\}`

`\Rightarrow PMT=(4300* 0.055)/((1-(1+(0.055)/(12))^(-48)).12)`

`\Rightarrow PMT=(236.5)/((1-(1.0046)^(-48)).12)`

`\Rightarrow PMT\approx100`

London's monthly payment $100

`I`= (100×48)-4300

=4800-4300

=$500

Finance charge $500.