Question

Congratulations! You just bought a new car. The car costs $28,000 and the car dealer allows you to finance it with a six year loan at an interest rate of 8% per year. You will be required to make fixed monthly car payments for 72 months (covering interest and amortization) until the loan is paid in full. What will be your monthly car payment?

Answer 1

EMI
Loan Amount	$   28,000.00
Interest rate per period (8%/12)	0.66666670%
Number of periods	72
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where,
EMI= Equal Monthly Payment
P= Loan Amount
R= Interest rate per period
N= Number of periods
= [ $28000x0.007 x (1+0.0066666667)^72]/[(1+0.006666667)^72 -1]
= [ $186.666676( 1.006666667 )^72] / [(1.00666667 )^72 -1
=$490.93