Question 1193475: You want to buy a $12,000 car. The company is offering a 5% interest rate compounded monthly for 48 months (4 years). What will your monthly payments be?
$
You want to buy a $205,000 home. You plan to pay 5% as a down payment, and take out a 30 year loan for the rest.
a) How much is the loan amount going to be?
$
b) What will your monthly payments be if the interest rate is 6%?
$
c) What will your monthly payments be if the interest rate is 7%?
$
Found 2 solutions by ElectricPavlov, ikleyn:
Answer by ElectricPavlov(122)   (Show Source):
You can put this solution on YOUR website! **Car Loan:**
* **Principal:** $12,000
* **Interest Rate:** 5% per year compounded monthly (0.05/12 per month)
* **Loan Term:** 48 months
**Monthly Payment:**
* Use the formula for monthly payments on a loan:
* **M = P * (r * (1 + r)^n) / ((1 + r)^n - 1)**
* where:
* M = Monthly payment
* P = Principal
* r = Monthly interest rate
* n = Number of payments
* **Calculation:**
* M = 12000 * ((0.05/12) * (1 + 0.05/12)^48) / ((1 + 0.05/12)^48 - 1)
* M ≈ $276.35
**Therefore, your monthly car payment will be approximately $276.35.**
**Home Loan:**
* **Home Price:** $205,000
* **Down Payment:** 5% of $205,000 = $10,250
* **Loan Amount (Part a):** $205,000 - $10,250 = $194,750
**Monthly Payments:**
* **Interest Rate 6% (Part b):**
* Use the same loan payment formula as above with:
* P = $194,750
* r = 0.06/12 = 0.005
* n = 30 years * 12 months/year = 360 months
* M ≈ $1167.62
* **Interest Rate 7% (Part c):**
* Use the same loan payment formula as above with:
* P = $194,750
* r = 0.07/12
* n = 360 months
* M ≈ $1295.68
**Therefore:**
* **a) Loan Amount:** $194,750
* **b) Monthly Payment at 6%:** $1167.62
* **c) Monthly Payment at 7%:** $1295.68
Answer by ikleyn(52760)  (Show Source):
You can put this solution on YOUR website! .
When you will read the post by @ElectricPavlov, be careful,
since the general formula for the monthly payment of a loan is written incorrectly in his post.
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