Chris and Carol just bought a $14,000 van and financed it for 5 years at 7% interest. What are the
monthly payments?
I = PRT
I = 14,000 * 0.07 * 5
I = 4,900
(14,000 + 4,900) / 60 = _______ monthly payment
What type of problem is this? amortization future value?present value? sinking fund? formula...
thank you ms sue
the amortization formula is
M = Pr/(1 - (1+r)^-n)
= 14000*(.07/12)/(1-(1+.07/12)^(-12*5))
= 277.22
To calculate the monthly payments on a loan, you can use the formula for calculating a fixed monthly payment for a loan amount with a specified interest rate and tenure. The formula is:
\[ P = \frac{Pv \times r \times (1 + r)^n}{(1 + r)^n - 1} \]
Where:
P = Monthly payment
Pv = Present value or loan amount
r = Monthly interest rate (Annual interest rate / 12)
n = Total number of monthly payments (Loan tenure in years x 12)
Let's calculate the monthly payments for this specific scenario.
Pv (Present value) = $14,000
r (Monthly interest rate) = 7% / 12 = 0.07 / 12 = 0.00583 (approx.)
n (Total number of monthly payments) = 5 years x 12 = 60 months
Now, let's substitute the values into the formula and solve for P:
\[ P = \frac{14000 \times 0.00583 \times (1 + 0.00583)^{60}}{(1 + 0.00583)^{60} - 1} \]
P = $\frac{14000 \times 0.00583 \times (1.00583)^{60}}{(1.00583)^{60} - 1}$
P = $\frac{14000 \times 0.00583 \times 1.441634}{1.441634 - 1}$
P = $\frac{121.6625969}{0.441634}$
P ≈ $275.70 (rounded to the nearest cent)
Therefore, the monthly payments for the $14,000 van financed over 5 years at a 7% interest rate would be approximately $275.70.