SOLUTION: Brett borrowed $11,000 at 7.2% interest to buy a car. It is a 6-year loan. Find the monthly payments. (Round your final answer to two decimal places.)

Algebra ->  Finance -> SOLUTION: Brett borrowed $11,000 at 7.2% interest to buy a car. It is a 6-year loan. Find the monthly payments. (Round your final answer to two decimal places.)       Log On


   

Question 1150338: Brett borrowed $11,000 at 7.2% interest to buy a car. It is a 6-year loan. Find the monthly payments. (Round your final answer to two decimal places.)

Answer by greenestamps(13209) About Me  (Show Source):
You can put this solution on YOUR website!


Loan formula:

P+=+A%28%281-%281%2B%28r%2Fn%29%29%5E%28-nt%29%29%2F%28r%2Fn%29%29

P = amount of loan
A = periodic payment
r = (annual) interest rate
n = number of payments per year
t = number of years

r/n = periodic interest rate
nt = number of payments

In this example...

P = 11000
A = unknown
r = 7.2% = 0.072
n = 12
t = 6

r/n = 0.072/12 = 0.006
nt = 72

11000+=+A%28%281-%281%2B.006%29%5E%28-72%29%29%2F%28.006%29%29

You can get absurd answers if you do the calculations with parentheses in the wrong places. I suggest the following sequence of calculations using a good calculator:
(1) 1.006^(-72)
(2) 1 - answer from (1)
(3) answer from (2) divided by .006
(4) 11000 divided by answer from (3)

Do the calculations carefully. My answer to the nearest cent was $188.60 per month.