Question

14 Problem 5-39 Loan Payments (LG5-9) You wish to buy a $23,500 car. The dealer offers you a 5-year loan with a 9 percent APR. What are the monthly payments (Do not round intermediate calculations and round your final answer to 2 decimal places.) -Book Payment per month Hint erences How would the payment differ if you paid interest only? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Payment per month

Answer 1

EMI payment $ 487.82 per month

Interest payment $ 176.25 per month

Explanation:

Computation of EMI:

Formula to compute EMI is:

EMI = [P x r x (1+r) ⁿ]/[(1+r) ⁿ – 1]

P = Principal of loan = $ 23,500

r = Periodic rate = 9 % APR or 0.09/12 = 0.0075 p.m.

n = Number of periods = 5 years x 12 months = 60 periods

EMI = [$ 23,500 x 0.0075 x (1+0.0075) ⁶⁰]/ [(1+0.0075) ⁶⁰ – 1]

     = [$ 23,500 x 0.0075 x (1.0075) ⁶⁰]/ [(1.0075) ⁶⁰ – 1]

     = ($ 23,500 x 0.0075 x 1.56568102694157)/ (1.56568102694157– 1)

     = $ 275.951280998452/ 0.56568102694157

     = $ 487.821347819315 or $ 487.82

Computation of Interest:

Monthly interest amount for the loan = Principal x rate

                                                      = $ 23,500 x 0.0075 = $ 176.25