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Calculating the quarterly installment of a car loan

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You need to borrow $65,000 for a new car. The annual interest rate is 12%, compounded quarterly. You will be making quarterly payments for three years.

1. What is your quarterly payment?
2. How much will you owe on the loan after you make the first payment?
3. How much will you owe on the loan after you make the 2nd payment?

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Solution Summary

The solution describes the steps to calculate the quarterly payment of a given car loan. It also calculates the principal left after payment of first two installments.

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1. What is your quarterly payment?
Loan amount=P=$65000
Rate of interest=i=12%/4=3% per quarter
Number of periods=n=3*4=12
Quarterly payments=R=?
We know that PV of an ordinary annuity is given ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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