Question

Roslyn has decided to purchase a $14,000 car. She plans on putting $2000 down toward the purchase, and financing the rest at a 6% interest rate for 4 years. Find her monthly payment

Answer 1

using the payment function, a $12,000 loan for 4 years at a rate of 6%, your payment would be $281.82

Answer 2

Answer:

$PMT=\frac{0.005 * 12000}{1-(1+0.005)^{-48}} = 281.82$

And the monthly payment for this case would be $281.82

Option D.

Explanation:

For this case the total for the car is $14000 and she gives a downpayment of $2000 so then we have remaining $14000-2000 = $12000 that needs to be financed.

For this case we have that the $APR = 6\%$ and the total time is given by t=4 years.

We want to calculate the monthly payment and we can use the following formula:

$PMT = \frac{r PV}{1-(1+r)^{-n}}$

For this case our value for r is given by $r = \frac{0.06}{12}=0.005$ since we need the rate monthly

$PV= 12000$

$n = 4*12 = 48 months$ in the 4 years

And if we replace we got:

$PMT= \frac{0.005 * 12000}{1-(1+0.005)^{-48}} = 281.82$

And the monthly payment for this case would be $281.82

Option D.