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10. Suppose you want to borrow $20,000 for a new car. Ford Credit offers you a 4 year auto loan at fixedrate 8% per year with monthly compounding. What is your monthly payment?

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Answer:

Monthly payment is $488.26

Explanation:

Loan amount: $20,000

Loan tenor: 4 years

Lending rate: 8% per year then monthly rate is 0.6667% per month

Interest occurred: monthly compounding

Payment: monthly

Number of payments: 48 (= 4 years * 12 months)

We can use formula in excel to calculate the payment =PMT(rate,number of payment,loan amount) = PMT(0.6667%,48,20000) = $488.26

I attached the calculation & checking in excel for your reference

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