Suppose you want to borrow $20,000 for a new car. You can borrow at 8% per year, compounded monthly. If you take a 4-year loan, what is your monthly payment?

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Alex · Accepted Answer

Since we want to borrow $20,000 at a future date we take $20,000 as our FV.
The rate of interest bring compounded monthly will be = (8/12)% = 0.00666677%
The total time period is 4 years i.e. 48 months.
Now, let us assume monthly payment is equal to x
20,000=x(1-1/1.006666748 )/ 0.0066667
x= $ 488.26

Suppose you want to borrow $20,000 for a new car. You can borrow at 8% per year, compounded monthly. If you take a 4-year loan, what is your monthly payment?

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