If you take out an $8,400 car loan that calls for 36 monthly payments starting after 1 month at an APR of 9%, what is your monthly payment?
To calculate the monthly payment, you can use the formula for a basic loan payment called the amortization formula. The formula is as follows:
Monthly Payment = [P * i * (1 + i)^n] / [(1 + i)^n - 1]
Where:
P is the principal amount (loan amount)
i is the monthly interest rate
n is the total number of payments
Let's break down the information given in the question:
Principal amount (loan amount), P = $8,400
Annual Percentage Rate (APR) = 9%
Monthly interest rate, i = (APR / 12) / 100
To find the monthly interest rate (i):
i = (9 / 12) / 100
i = 0.0075
The loan calls for 36 monthly payments, but it starts after 1 month. So, the total number of payments, n, will be 35.
Now, let's plug in the values into the formula:
Monthly Payment = [P * i * (1 + i)^n] / [(1 + i)^n - 1]
Monthly Payment = [8400 * 0.0075 * (1 + 0.0075)^35] / [(1 + 0.0075)^35 - 1]
Calculating this equation gives the answer in terms of dollars. Rounding to the nearest cent, the monthly payment will be approximately $261.49.
I = Prt
I = 8,400 * 0.09 * 3 = 2268
(2,268 + 8,400)/36 = ?