You want to buy a car. The loan amount will be $14,000. The company is offering a 3% interest rate for 60 months (5 years). What will your monthly payments be?
To calculate the monthly payments, we can use the formula for an amortizing loan:
Monthly Payment = P * R * (1+R)^N / ((1+R)^N - 1)
Where:
P = Loan amount = $14,000
R = Monthly interest rate = Annual interest rate / 12 months / 100
N = Total number of payments = 60 months
So, let's calculate the monthly payment:
R = 3% / 12 / 100 = 0.0025
Monthly Payment = 14000 * 0.0025 * (1+0.0025)^60 / ((1+0.0025)^60 - 1)
= 14000 * 0.0025 * (1.0025^60) / ((1.0025^60) - 1)
≈ $253.37
Therefore, your monthly payments will be approximately $253.37.