Fred purchased a boat for $18,000. He paid 10% down and the balance in equal monthly payments over five years at 18% compounded monthly. What does Fred pay each month?

A) $405.29
B) $457.08
C) $411.37
D) $450.33
E) $344.20

Question

Jenna Bangeles · Accepted Answer

Final Answer : C, Explanation :   Fred's down payment is 10% of $18,000, which is $1,800. Therefore, the balance he needs to finance is $18,000 - $1,800 = $16,200. The interest rate is 18% per annum, compounded monthly, which means the monthly interest rate is 18%/12 = 1.5%. The loan term is 5 years, which is 60 months. Using the formula for a fixed-rate loan payment,   P M T = P × r ( 1 + r ) n ( 1 + r ) n − 1 PMT = P 	imes \frac{r(1+r)^n}{(1+r)^n-1} PMT = P × ( 1 + r ) n − 1 r ( 1 + r ) n ​  , where PMT is the monthly payment, P is the principal amount ($16,200), r is the monthly interest rate (1.5% or 0.015), and n is the total number of payments (60), we can calculate the monthly payment. Plugging the values into the formula gives a monthly payment of approximately $411.37.

Fred purchased a boat for $18,000. He paid 10% down and the balance in equal monthly payments over five years at 18% compounded monthly. What does Fred pay each month?

A) $405.29
B) $457.08
C) $411.37
D) $450.33
E) $344.20

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Learning Objectives

Related questions

Fred purchased a boat for $18,000. He paid 10% down and the balance in equal monthly payments over five years at 18% compounded monthly. What does Fred pay each month?A) $405.29B) $457.08C) $411.37D) $450.33E) $344.20

Definitions

Learning Objectives

Learning Objectives

Related questions

Fred purchased a boat for $18,000. He paid 10% down and the balance in equal monthly payments over five years at 18% compounded monthly. What does Fred pay each month?

A) $405.29
B) $457.08
C) $411.37
D) $450.33
E) $344.20