The Jepsens are buying a $23,400 car and financing it over the next 4 years.They secure an 8.6% loan. What will their monthly payments be?
A)$564.51
B)$607.53
C)$582.35
D)$577.88

Question

Quizplus · Accepted Answer

To calculate the monthly payment, we use the formula for an amortizing loan: M = P[r(1+r)^n]/[(1+r)^n – 1], where P is the principal ($23,400), r is the monthly interest rate (8.6% annual rate divided by 12 months = 0.0071667), and n is the number of payments (4 years * 12 months = 48). Plugging in these values, the monthly payment is approximately $577.88.

The Jepsens Are Buying a $23,400 Car and Financing It