Question

Find the monthly payment of a person who secures a loan of 4,000$whichhewillpaybackin$36$monthswithamonthlyinterestrateof$0.01$ such that $M=\frac{rP}{1-{\left(\frac{1}{1+r}\right)}^t}$ where $M$ is the monthly payment, $r$ is the monthly decimal interest rate, $P$ is the amount borrowed and $t$ is the number of months it will take to repay the loan.

• A. 111.11$
• B. 119.32$
• C. 132.86$
• D. 147.16$
• E. 175.89$

Answer 1

The correct option is C 132.86$

$M=\frac{rp}{1-{\left(\frac{1}{1+r}\right)}^t}$

Now put $r=0.01,P=$ 4000 , t=36$ , we get
$M=\frac{40}{1-{\left(\frac{1}{1.01}\right)}^{36}}$

$=\frac{40}{1-0.6989}$

$=\frac{40}{0.301}$

$=132.86$