Algebra Pearson

Question

What would be the monthly payment on a

51​-month

new car purchase loan of

​$70,000

if the interest rate is

5​%? Do not round.

Answer 1

In order to compute this one you want to use the annuity formula

PMT = P * [rate(1 + rate)^n] / [(1 + rate)^n – 1]

For this loan that would be

PMT = 70000 * [0.05/12 (1 + 0.05/12)^51] / [(1 + 0.05/12)^51 – 1]

PMT = $1526.39

So the monthly payment here should be $1526.39