Question

To buy a car, you borrow $25,000 with a term of three years at an APR of 6.5%. What is your monthly

Answer 1

Answer:

  $766.23

Step-by-step explanation:

The amortization formula is appropriate for this. (Better, use a financial calculator or spreadsheet.)

  A = P(r/12)/(1 -(1 +r/12)^-(12t))

where P is the amount borrowed (25,000), r is the annual rate (0.065), and t is the number of years (3).

Putting the given numbers into the formula, we have ...

  A = $25,000(0.065/12)/(1 -(1 +0.065/12)^(-36))

  A = $25,000(.00541667)/(1 -1.00541667^-36)

  A = $25,000(0.00541667)/(0.1767322)

  A = $766.23

The monthly payment is $766.23.

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Comment on tools

A graphing or scientific calculator is useful for these. Something like a TI-84, or any of the equivalents, will have financial calculations like this built in. There are also numerous apps available for phone or tablet that will do financial calculations.