Question

(Nonannual compounding using a calculator) Prof. Finance is thinking about trading cars. He estimates he will still have to borrow $30,000 to pay for his new car How large will Prof. Finance's monthly car loan payment be if he can get a 7-year (84 equal monthly payments) car loan from the university's credit union at 9.8 percent? 

Prof. Finance's monthly car loan payment will be $_______  (Round to the nearest cent.)

Answer 1

Monthly Car Loan Payment

Here, we’ve Loan Amount (P) = $30,000

Monthly Interest Rate (n) = 0.816667% per month [9.80% / 12 Months]

Number of months (n) = 84 Months [7 Years x 12 Months]

Therefore, the Monthly Loan Payment = [P x {r (1 + r)ⁿ} ] / [(1 + r)ⁿ – 1]

= [$30,000 x {0.0035416667 x (1 + 0.00816667)⁸⁴}] / [(1 + 0.00816667)⁸⁴ – 1]

= [$30,000 x {0.00816667 x 1.9802320}] / [1.9802320 – 1]

= [$30,000 x 0.0161719] / 0.9802320

= $485.16 / 0.9802320

= $494.94 per month

“Hence, the monthly car loan payment will be $494.94”