Suppose that you borrow $15 comma 000 for five years at 6% toward the purchase of a car. Use PMT equals [tex]\frac{P (\frac{r}{n})}{1 - (1 + \frac{r}{n})^-}[/tex] to find the monthly payments and the total interest for the loan.
Accepted Solution
A:
Answer:Monthly payments = $ 289.992Total interest = $ 2399.520Step-by-step explanation:Given formula of monthly payments,[tex]PMT=\frac{P(\frac{r}{n})}{1-(1+\frac{r}{n})^{-nt}}[/tex]Where,P = present value,r = annual interest rate,n = number of months in a year ( i.e. 12 months ),t = number of years,Here,P = $ 15,000,t = 5 years,r = 6% = 0.06Hence, the monthly payment would be,[tex]PMT=\frac{15000(\frac{0.06}{12})}{1-(\frac{0.06}{12})^{-60}}[/tex][tex]=\frac{15000(0.005)}{1-(0.005)^{-60}}[/tex][tex]\approx \$ 289.992[/tex]Also, the total interest of the loan = monthly payment × number of months - present value of loan= 289.992 × 60 - 15000= $ 2399.520