Question

1] Assume one wants a monthly car payment of $200.00. Assume the interest rate on 60-month car loans is 5.5%. Assume one has $2,750 to put down on the car. Given these assumptions, what is the most this person should pay for a car?

2] If one finances $257,000 for a home at 4.9% interest for 30 years, what would be the monthly payment for principal and interest?

Answer 1

1.

Monthly payment = $200

Monthly rate R = 5.5%/12

down payment = $2750

Time = 60 months

So,

Price of the car = 2750 + 200*(1- 1/(1+ 5.5%/12)^60)/(5.5%/12)

Price of the car = $13220.57 or $13221

Hence, maximum amount to be paid for the car is $13220.57 or $13221.

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2.

Loan amount = $257000

Monthly rate R = 4.9%/12

Time = 360 months (30 years)

Let, monthly payment = P

Then,

P = 257000 / ((1-1/(1+4.9%/12)^360)/(4.9%/12))

P = $1363.97 or $1364

So, monthly payment will be $1363.97 or $1364.