FINANCE: ANNUITIES

Question

Nestor is building a new swimming pool for $11,000. He makes a $2,000 down payment and the builder gives him an add-on loan, charging him an annual interest rate of 7.6%. If he takes a 4-year loan, what will Nestor's monthly payments be?

 

PLEASE GIVE STEPS AND ANSWER PLEASE

Answer 1

To determine the proper payment amount, we must first deduct out the $2,000 down payment:

 

$11,000 - $2,000 = $9,000

 

So, the loan Principal Amount (A) is:  $9,000

 

To calculate the Payment Amount (A), we do the following:

 

Monthly Interest Rate:  (0.076÷12) = 0.006333333

 

The PMT amount is:  [(9,000 * 0.006333333)] / [1 - (1 + 0.006333333)^-48]

 

So, the PMT amount is:  [57] / [0.2614314535] = $218.03

 

So, the monthly payments are $218.03