Question

g You borrow $10,000 from your bank to buy a new car. If the loan is for four years at 7% annual interest and payments are made monthly, how much will your monthly payments be

Answer 1

Answer:

$ 238.47

Explanation:

To do the calculation first you have to identify that they are asking for the monthly payment so all the calculation will be done by month.

First you calculate the monthly rate, you change the TEA 7% to TEM which is 0.57%  (use the formula (1+TEA)^(1/12))-1.

The loan period is 4 years but you have to convert it to months so will be 48 months.

With all this information you can calculate the payment by month, you can use excel with the excel formula PMT(rate;period;loan amount).