SOLUTION: A man is considering the purchase of a used automobile. The total price is $6200. With $1240 as a down payment, and the balance to be paid in 48 equal monthly payments with intere

Question 1170478: A man is considering the purchase of a used automobile. The total price is $6200. With $1240 as a down payment, and the balance to be paid in 48 equal monthly payments with interest rate at 12% compounded monthly. The payments are due at the end of each month. Determine the monthly payment required.

Answer by ikleyn(52803) (Show Source): You can put this solution on YOUR website!
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A man is considering the purchase of a used automobile. The total price is $6200.
With $1240 as a down payment, and the balance to be paid in 48 equal monthly payments
with interest rate at 12% compounded monthly. The payments are due at the end of each month.
Determine the monthly payment required.
~~~~~~~~~~~~~~~~~~~~~~

The loaned amount is  $6200 - $1240 = $4960.


To find the monthly payment M, use the formula

    M = 


where L is the loan amount of $4960; 

r =  = 0.01 is the effective compounding interest rate per month;

n is the number of payments (48 in this problem, as given).


Substitute these values into the formula and get for monthly payment

    M =  = $130.62  (rounded).


Thus, the monthly payment is $130.62.    ANSWER

Solved.

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