Question

joey wants to buy $4,000 vehicle with 10% down for three years at 12% interest. What will his monthly payment be?

Answer 1

Answer:

$119.57

Step-by-step explanation:

We have to find present value of annuity to find the monthly payment.

Given,

Present value, PV = $4,000

Down payment = $4,000 × 10% = $400

Remaining present value = $(4,000 - 400) = $3,600

Interest, i = 12% = 0.12

As we need monthly payment, the interest rate will be monthly = 0.12/12 = 0.01.

Number of period, n = 3

monthly payment, m = 12

We know,

Present value of annuity = PMT × $\frac{1 - (1 + \frac{i}{m})^{-n*m} }{\frac{i}{m} }$

$3,600 = PMT × $\frac{1 - (1 + \frac{0.12}{12})^{-3*12} }{\frac{0.12}{12} }$

or, $3,600 = PMT × 30.1075

or, PMT = $119.57

Monthly payment should be $119.57