Question

You want to buy a car, and a local bank will lend you $30,000. The loan would be fully amortized over 6 years (72 months), and the nominal interest rate would be 6%, with interest paid monthly. What is the monthly loan payment? Do not round intermediate calculations. Round your answer to the nearest cent.
$



What is the loan's EFF%? Do not round intermediate calculations. Round your answer to two decimal places.


%

Answer 1

Answer:

- 56,667cents

- 6.17%

Step-by-step explanation:

Before we can determine the monthly loan paymnet, we must first calculate the total amount paid at the end of 6years.

Amount = Principal + Interest

Given Principal = $30,000

Interest = Principal * rate * time/100

Interest = $30,000*6*6/100

Interest =  $10,800

Amount =  $30,000+ $10,800

Amount =  $40,800

If amount paid after 6years is $40,800, my monthly loan payment = $40,800/72 ≈ $566.67 to nearest dollar.

since $1 - 100cents

$566.67 = 100 * 566.67

$567 = 56,667cents

Monthly loan payment to nearest cent will be  56,667cents

EFF = (1 + r /n)^n - 1

r is the rate and n is the number of period per year which is 12months

%EFF = EAR = (1 + 0.06 /12)^ 12 - 1

%EFF = 1.005^12

%EFF = 1.061678 - 1

%EFF = 0.061678

%EFF = 6.17% to 2dp