The Jepsens are buying a $22,800 car and financing it over the next 6 years.They secure a 6.5% loan. What will be the total of the monthly payments? Round to the nearest cent.
A)$23,455.90
B)$27,595.18
C)$9,198.39
D)$82,785.54
E)$13,797.59

Question

Quizplus · Accepted Answer

To find the monthly payment, we need to use the formula for the fixed payment on a loan:

M = P * (r(1+r)^n)/((1+r)^n - 1)

Where:
M = monthly payment
P = principal (loan amount)
r = monthly interest rate (6.5% / 12 = 0.00541667)
n = number of payments (6 years * 12 months/year = 72)

Substituting in our values:

M = 22,800 * (0.00541667(1+0.00541667)^72)/((1+0.00541667)^72-1)
M = $384.14

However, we need to round to the nearest cent and also find the total of the monthly payments over 6 years, so we need to multiply this by the number of payments:

Total = 384.14 * 72
Total = $27,595.18

Therefore, the best choice is B.

The Jepsens Are Buying a $22,800 Car and Financing It