Question

You have just purchased a new Corvette Convertible for $52,000. You have paid $5,000 down and have financed the rest. The financing arrangement calls for you to make monthly payments for the next 5 years at an 8% interest rate. What will be the amount of your payment?

Answer 1

we have been provided with the following information  a new Corvette Convertible for $52,000 was purchased, down payment of 5000, it calls for us to make monthly payments for the next 5 years at an 8% interest rate.   we are required to compute the amount of our payment.

first lets understand what annuity means , annuity is a contractual series of payments to made in the predetermined/ fixed interval of period

Computation of Annuity payments is as follows :

payable amount =(52000-5000) =47000

n= 12*5 = 60

r= .08/12= .00666

Annuity payments = payable amount * present value of an annuity factor (1/ (1+r)ⁿ)

= payable amount * 1/(1+.00666)⁶⁰

=47000* 1/49.327

=47000* .02027

=952.81