The monthly payment, M, is computed as follows:
[tex]M=\frac{P(\frac{r}{12})(1+\frac{r}{12})^n}{(1+\frac{r}{12})^n-1}[/tex]
where
P is the amount borrowed
r is the annual interest rate, as a decimal
n is the number of months
Substituting with P = $1,250, r = 0.135 (= 13.5/100), and n = 54 months, we get:
[tex]\begin{gathered} M=\frac{1250(\frac{0.135}{12})(1+\frac{0.135}{12})^{54}}{(1+\frac{0.135}{12})^{54}-1} \\ M=31.01\text{ \$} \end{gathered}[/tex]
She will have to pay $31.01 every month.
