The Jepsens are buying a $20,100 car and financing it over the next 2 years.They secure a 6.1% loan. What will be the total of the monthly payments? Round to the nearest cent.
A)$64,206.03
B)$21,402.01
C)$18,191.71
D)$7,134.00
E)$10,701.01

Question

Quizplus · Accepted Answer

To calculate the total of the monthly payments for a loan, you can use the formula for the monthly payment on an installment loan: M = P[r(1+r)^n]/[(1+r)^n - 1], where M is the monthly payment, P is the principal amount ($20,100), r is the monthly interest rate (annual rate divided by 12, so 6.1%/12 = 0.0050833), and n is the total number of payments (2 years * 12 months = 24). Plugging in the values: M = $20,100[0.0050833(1+0.0050833)^24]/[(1+0.0050833)^24 - 1]. Calculating this gives a monthly payment of approximately $891.75. Multiplying this monthly payment by the total number of payments (24) gives the total of the monthly payments: $891.75 * 24 ≈ $21,402.00, which rounds to $21,402.01, making option B the correct answer.

The Jepsens Are Buying a $20,100 Car and Financing It