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

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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) About Me  (Show Source):
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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.
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The loaned amount is  $6200 - $1240 = $4960.


To find the monthly payment M, use the formula

    M = L%2A%28r%2F%281-%281%2Br%29%5E%28-n%29%29%29


where L is the loan amount of $4960; 

r = 0.12%2F12 = 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 = 4960%2A%280.01%2F%281-%281%2B0.01%29%5E%28-48%29%29%29 = $130.62  (rounded).


Thus, the monthly payment is $130.62.    ANSWER

Solved.