Question

You want to buy a $33,000 car. The company is offering a 5% interest rate for 60 months (5 years). What will your monthly payments be?

Answer 1

Price of the car or Principle amount= $33000

Rate of interest = 5% or 0.05

Time period = 5 years

Interest = principle*rate*time

I = $33000\times0.05\times5$

I = $8250

So, total amount that will be payable after 5 years will be = principle plus interest

$33000+8250=41250$

So Let us assume that 5% rate is flat and this is not increasing or decreasing in 5 years. So, $41250 is to be paid in 60 months.

So in 1 month one has to pay = $\frac{41250}{60}=687.50$

Hence, the monthly payment will be $687.50