Question

g you have just taken out a 5 year car loan. The amount of the loan is $20,000 and the interest rate on the loan is 6% per year. What will be the amount of your monthly car loan payments

Answer 1

Amount to be paid monthly for the period of 5 years is $446

Step-by-step explanation:

Here, we want to calculate the amount to pay on the loan per year.

This is a case of a loan amount compounded yearly;

Loan amount = P( 1 + r)^t

r = 6% = 6/100 = 0.06

P is the amount borrowed = $20,000

t is the number of years = 5

So we have ;

A = 20,000( 1 + 0.06)^5

A = 20,000(1.06)^5

A = 26,764.5 which is approximately $26,765

This is the total amount to pay back

The number of months in 5 years is 5 * 12 = 60 months (12 months in a year)

So the amount to payback per month will be;

$26,765/60 = $446.083 which is approximately $446