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Caleb bought a car for $6,900. He agreed on a five-year loan at a 5.4% interest rate. Calculate what Caleb's monthly payments will be.

  • jushmk: P =AD,

    P = Monthly payment
    A = Cost of the car
    D = [R/12]/[1-(1+R/12)^-12n], where R = Annual interest = 5.4% = 0.054, n = Number years = 5
    Therefore,
    D = [0.054/12]/[1-(1+0.054/12)^-12*5] = 0.019055

    And,
    P = 6,900*0.019055 = $131.48

    Monthly payment will be $131.48.

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