Suppose a car cost 32000 and you are allowed to make a down payment of 20%, but have to borrow the remaining 80%. If you are allowed 5 years to pay back the loan, how much will you pay back monthly?
What interest rate is your lender charging you?
Without figuring interest,
32,000 * 0.8 = 25,600
25,600 / 60 = ?
The interest rate is 3.69%
let the monthly payment be P
i = .0369/12 = .003075
n = 60
80% of 32000 = 25600
P( 1 - 1.003075^-60)/.003075 = 25600
P = $467.89
To find out how much you will pay back monthly, you'll need to calculate the loan amount and then divide it by the number of months in the loan term.
Firstly, calculate the down payment by multiplying the cost of the car ($32,000) by the down payment percentage (20%):
Down payment = $32,000 x 20% = $6,400
The loan amount is the remaining 80% after the down payment:
Loan amount = $32,000 - $6,400 = $25,600
Next, calculate the total interest paid over the loan term. Assuming an annual interest rate of x% (not given in the question), you'll need to divide that by 100 to convert it into a decimal:
Interest rate (decimal) = x / 100
Since the loan term is given as 5 years, the number of months in the loan term is 5 years × 12 months/year = 60 months.
To calculate the monthly payment amount, you can use the formula for calculating the monthly payment on a fixed-rate loan:
Monthly payment = (Loan amount + Total interest) / Number of months
To calculate the total interest, multiply the loan amount by the interest rate (decimal) and the loan term (in years):
Total interest = Loan amount × Interest rate (decimal) × Loan term
Finally, plug in the values into the formula to calculate the monthly payment:
Monthly payment = (Loan amount + Total interest) / Number of months
Keep in mind that without knowing the annual interest rate, it is not possible to calculate the exact monthly payment.