Question

Leo decides to buy a car for $9600 with a 5-year finance plan that offers 0% financing for the first yearThe APR after that will be 3.9%. Interest is compounded monthly. How much will his monthly payment be if he makes payments of $150 per month during the first year?

Answer 1

Answer:

The monthly payment of Leo for the car loan for next four years is $759.5

Step-by-step explanation:

Given as :

The loan of the car = $9600

The rate of interest for first year = 0%

The next 4 years, the rate of interest = 3.9%  compounded monthly

The amount paid for first year = $150 per months

I.e The amount paid for first month = $150 × 12 = $1800

Let The amount for next fours years = $A

Now, According to question

∵ For the first year $1800 is paid

So, The rest amount of loan = $9600 - $1800 = $7800

From compound interest

Amount = principal × $(1+\dfrac{\textrm rate}{12\times 100})^{\textrm 12\times time}$

Or, $A = $7800 ×  $(1+\dfrac{\textrm 3.9}{12\times 100})^{\textrm 12\times 4}$

Or, A =  $7800 × $(1.00325)^{48}$

Or,  A =  $7800 × 1.1685

∴ A = $9114.3

So, The amount paid after 4 years = A = $9114.3

Or,The amount paid after 4 years as per months = $\dfrac{9114.3}{12}$

Or,The amount paid after 4 years as per months = $759.5

Hence The monthly payment of Leo for the car loan for next four years is $759.5 Answer