Question

Mrs. Landingham recently purchased a new car. In addition to her down payment she will borrow $10,000 to pay for the car, which she will pay back with 60 equal monthly payments over the next five years. The stated annual interest rate is 12%, compounded monthly. If she receives the loan today and makes her first payment one month from today, what will be the amount of her first payment?

Mrs. Landingham recently purchased a new car. In addition to her down payment she will borrow $10,000 to pay for the car, which she will pay back with 60 equal monthly payments over the next five years. The stated annual interest rate is 12%, compounded monthly. If she receives the loan today and makes her first payment one month from today, what will be the amount of her first payment? Select one: a. $324.98 b. $342.50 c. $460.55 d. $223.80 e. $222.44

I've tried so many times and I don't have any examples similar to my question to help. I keep getting ~ $272 but that's not an answer choice.

Help is greatly appreciated! (with an explanation because I actually want to know how to do it myself)

Answer 1

[Pxrx(1+rn]1+r)^n-1] Monthly payment Here, 1 Interest rate per annum 12.0% 2 Number of years 3 Number of compoundings per per annum 1:3 Interest rate per period (r) 2x3 Number of periods (n) Loan amount (P) 5 12 1.0% 60 $ 10,000 Monthly payment $ 222.44 (10000x1%(1+1%)^60)=((1+1%)^60-1)

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