Question

what is the minimum payment amount Walter will need to make for his car loan

Answer 1

Step 1

State the formula for compound interest compounded monthly.

$A=p(1+\frac{r}{n})^{nt}$

Where

$\begin{gathered} A=\text{ miminum payment amount} \\ p=\text{ principal= \ }36,950 \\ r=\text{ monthly rate= }\frac{3.25}{100}=0.0325 \\ n=\text{ Number of times of compounding annually = 12} \\ t=\text{ Period for payment of loan =}5\text{ years} \end{gathered}$

Step 2

Find the amount

$A=36950(1+\frac{0.0325}{12})^{12\times5}$$A=36950(1.002708333)^{60}$

Hence the minimum amount Walter will need to make for his car loan is