A Honda costs $19,000. Joan put down $2000 and was told the balance would be paid off in 36 equal monthly payments with interest of 6% per year on the unpaid balance compounded monthly. Find the amount she will pay monthlyGroup of answer choices$616.26$735.64$517.17$899.15
Question
A Honda costs 2000 and was told the balance would be paid off in 36 equal monthly payments with interest of 6% per year on the unpaid balance compounded monthly. Find the amount she will pay monthlyGroup of answer choices735.64899.15
Solution
To solve this problem, we need to use the formula for the monthly payment of a loan, which is:
P = [r*PV] / [1 - (1 + r)^-n]
where: P is the monthly payment r is the monthly interest rate PV is the present value or the amount of the loan n is the number of payments
First, we need to calculate the amount of the loan, which is the cost of the Honda minus the down payment Joan made. So, PV = 2,000 = $17,000.
The annual interest rate is 6%, so the monthly interest rate is 6% / 12 = 0.5% = 0.005 (in decimal form).
The number of payments is 36.
Substituting these values into the formula, we get:
P = [0.005 * 85 / [1 - (1.005)^-36] P = 85 / 0.16473 P = $516.26
So, Joan will pay approximately 517.17.
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