Question

Suppose that you borrow ​$10 comma 000 for five years at 6​% toward the purchase of a car. Use PMT equals StartStartFraction Upper P left parenthesis StartFraction r Over n EndFraction right parenthesis OverOver 1 minus left parenthesis 1 plus StartFraction r Over n EndFraction right parenthesis Superscript negative nt EndEndFraction to find the monthly payments and the total interest for the loan.

Answer 1

The monthly payments $193.33.

The total interest for the loan $1,599.8.

Explanation:

Given formula:

`PMT=(P* \frac rn)/(1-(1+\frac rn)^(-nt))`

`I`= (PMT×nt)-P

PMT= Monthly installment

P= Present value

r= Rate of interest

t= Time

n= Number of interest per year.

Here,

P=$10,000, r= 6%=0.06, t= 5 years, n=12

`PMT=\frac{10000* \frac {0.06}{12}}{1-(1+\frac {0.06}{12})^(-12.5)}`

`\Rightarrow PMT=(50)/(1-(1.005)^(-60))`

`\Rightarrow PMT\approx 193.33`

`I`= (PMT×nt)-P

=(193.33×12×5)-10,000

=11,599.8 -10,000

=$1,599.8

The monthly payments $193.33.

The total interest for the loan $1,599.8.