Asked by Alondra Bello on May 21, 2024
Verified
Taneeka borrowed $12,000 for a car for 6 years at an APR of 7.25%.Her monthly payment will be $206.03.
Monthly Payment
A specified amount of money paid once per month, often related to loans or service subscriptions.
- Identify the correct term for a loan by evaluating monthly repayments and interest charges.
Verified Answer
BM
Bella MarianoMay 24, 2024
Final Answer :
True
Explanation :
To check if the monthly payment is correct, we can use the formula for calculating loan payments:
P = (R * A) / (1 - (1 + R) ^ (-N))
where:
P = monthly payment
R = monthly interest rate (APR divided by 12)
A = loan amount (principal)
N = total number of payments (6 years multiplied by 12 months per year)
Plugging in the values given:
R = 0.0725 / 12 = 0.006042
A = $12,000
N = 6 * 12 = 72
P = (0.006042 * 12,000) / (1 - (1 + 0.006042) ^ (-72))
P = $206.03 (rounded to the nearest cent)
Since the calculated monthly payment matches the given monthly payment, the answer is true.
P = (R * A) / (1 - (1 + R) ^ (-N))
where:
P = monthly payment
R = monthly interest rate (APR divided by 12)
A = loan amount (principal)
N = total number of payments (6 years multiplied by 12 months per year)
Plugging in the values given:
R = 0.0725 / 12 = 0.006042
A = $12,000
N = 6 * 12 = 72
P = (0.006042 * 12,000) / (1 - (1 + 0.006042) ^ (-72))
P = $206.03 (rounded to the nearest cent)
Since the calculated monthly payment matches the given monthly payment, the answer is true.
Learning Objectives
- Identify the correct term for a loan by evaluating monthly repayments and interest charges.