Jack purchased a car for $22,000. The bank gave him an annual interest rate of 4.3%. He will make monthly payments for 6 years (or 72 months). Jack followed these steps to determine his approximate monthly payments. Read through the steps, and then choose Jack’s approximate monthly payment from the drop‐down menu.
1.Calculate the interest rate per period.
0.043
12
≈ 0.00358
2.Add 1 to the interest rate per period.
1 + 0.00358 = 1.00358
3. Raise the number calculated in step 2 to the negative power of the number of loan payments to be made, and then subtract this number from 1.
1.00358-(12)(6) = 1.00358-72 ≈ 0.7731
1 − 0.7731 = 0.2269
4. Divide the interest rate per period by the number calculated in step 3.
0.00358
0.2269
≈ 0.0158
5. Multiply the quotient from step 4 by the principal.
Jack’s monthly payment ≈
Complete step 5 to determine Jack's monthly payment for the loan. Round to the nearest cent.