Question

11. Terry decided to purchase a 15, 999MSRP vehicle at 4% interest rate for 6 years . The dealership offered her a $1700 cash-back incentive, which she accepted. Taking all these factors into consideration , what monthly payment amount can she expect?

Answer 1

$223.71

Explanation:

Assuming Terry applied her "cash back" to the purchase price, it appears she financed $15,999 -1,700 - 14,299. The amortization formula tells what her monthly payment is.

A = P(r/12)/(1 -(1 +r/12)^(-12t))

This gives the payment for a loan of P at annual rate r for t years.

A = $14,299(0.04/12)/(1 -(1 +0.4/12)^(-12·6)) = $223.71

Terry's monthly payment will be about $223.71.