Question

Suppose that you borrow ​$10 comma 000 for five years at 6​% toward the purchase of a car. Use PMT equals StartStartFraction Upper P left parenthesis StartFraction r Over n EndFraction right parenthesis OverOver 1 minus left parenthesis 1 plus StartFraction r Over n EndFraction right parenthesis Superscript negative nt EndEndFraction to find the monthly payments and the total interest for the loan.

Answer 1

Answer:

The monthly payments $193.33.

The total interest for the loan $1,599.8.

Step-by-step explanation:

Given formula:

$PMT=\frac{P\times \frac rn}{1-(1+\frac rn)^{-nt}}$

$I$= (PMT×nt)-P

PMT= Monthly installment

P= Present value

r= Rate of interest

t= Time

n= Number of interest per year.

Here,

P=$10,000, r= 6%=0.06, t= 5 years, n=12

$PMT=\frac{10000\times \frac {0.06}{12}}{1-(1+\frac {0.06}{12})^{-12.5}}$

$\Rightarrow PMT=\frac{50}{1-(1.005)^{-60}}$

$\Rightarrow PMT\approx 193.33$

$I$= (PMT×nt)-P

 =(193.33×12×5)-10,000

 =11,599.8 -10,000

 =$1,599.8

The monthly payments $193.33.

The total interest for the loan $1,599.8.