You want to buy a car, and a local bank will lend you $30,000

Finance Oct 20, 2020

You want to buy a car, and a local bank will lend you $30,000. The loan will be fully amortized over 4 years, and the nominal interest rate will be 6.5% with interest paid monthly. What will be the monthly loan payment? Answer with 2 decimals (ex. $1,000.00).

Expert Solution

Computation of Monthly Payment using PMT Function in Excel:

=pmt(rate,nper,-pv,fv)

Here,

PMT = Monthly Loan Payment = ?

Rate = 6.5%/12 = 0.5417%

Nper = 4 years*12 months = 48 months

PV = $30,000

FV = 0

Substituting the values in formula:

=pmt(0.5417%,48,-30000,0)

PMT or Monthly Payment = $711.45

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