OMG I CAN NOT get this !!!!
Purchase price of article = $495
Down payment = $50
Number of payments = 36
True annual interest rate = 18%
Monthly payment amount = $
The formula is I= 2YC
________
M(N+1)
y = the number of payments made in a year.
m = the amount financed or how much money was loaned.
c = the total amount of interest charges.
n = the number of payments for the whole loan.
I = interest
To calculate the monthly payment amount, you can use the formula I=2YC / M(N+1). Given the values provided, let's break down how to solve for the monthly payment amount:
1. Determine the values for the variables in the formula:
- Y: The number of payments made in a year. In this case, it's 12 since there are 12 months in a year.
- C: The total amount of interest charges. We need to calculate this.
- M: The amount financed or how much money was loaned. In this case, it's the purchase price minus the down payment: M = $495 - $50 = $445.
- N: The number of payments for the whole loan. In this case, it's 36.
2. Calculate the interest charges (C):
- We can use the true annual interest rate of 18% to calculate the total interest charges over the life of the loan.
- Divide the interest rate by the number of payments made in a year to find the monthly interest rate: 18% / 12 = 1.5% per month.
- Multiply the monthly interest rate by the amount financed: 1.5% * $445 = $6.68 (rounded to two decimal places) per month.
- Multiply the result by the number of payments for the whole loan: $6.68 * 36 = $240.48 (rounded to two decimal places) for the total interest charges.
3. Substitute the calculated values into the formula:
- I=2YC / M(N+1)
- I = 2 * $240.48 / $445(36+1)
4. Calculate the monthly payment amount (M):
- Divide 2 multiplied by the total interest charges by the amount financed multiplied by the sum of the number of payments and 1: (2 * $240.48) / ($445 * 37) = $0.67 (rounded to two decimal places).
Therefore, the monthly payment amount is approximately $0.67.