Question 1207350
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Valley Auto sold a used car priced at $10 600 for 10% down and the balance to be paid 
in equal monthly payments over four years at 7.2% compounded monthly. 
How much does the buyer have to pay at the end of each month?
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<pre>
With the discount of 10%, you actually buy a used car for 0.9*10600 = 9540 dollars.
You pay back for your purchase by equal parts in 4 years as a loan. They want you find your monthly payment.


Use the formula for the monthly payment for a loan

    M = {{{P*(r/(1-(1+r)^(-n)))}}}


where P is the loan amount;  r = {{{0.072/12}}} = 0.006  is the effective interest rate per month;
n is the number of payments (same as the number of months, or 4*12 = 48); M is the monthly payment.


In this problem  P = $9540;  r = 0.006.


Substitute these values into the formula and get for monthly payment

    M = {{{9540*(0.006/(1-(1+0.006)^(-48)))}}} = {{{9540*(0.006/(1-(1.006)^(-48)))}}} = 229.3334.


Round it to the closest cent.  You will get the  <U>ANSWER</U>:  the monthly payment is $229.33.


In total, you will pay  4*12*229.33 = 11,007.84 dollars in 4 years.


The difference $11.007.84 - $9540 = $1,467.84 is the interest you pay to financial company.
</pre>

Solved.


To see many other similar solved problems, look into the lesson

&nbsp;&nbsp;&nbsp;&nbsp;- <A HREF=https://www.algebra.com/algebra/homework/Finance/Loan-problems.lesson>Loan problems</A> 

in this site.


Learn the subject from there.