You want to buy a new sports car from Muscle Motors for $36,000. The contract is in the form of an annuity due for 60 months at an APR of 9.75 percent. |
What will your monthly payment be? |
Multiple Choice
$739.26
$760.47
$754.34
$769.43
$716.63
Loan amount = 36000
APR = 9.75%
Monthly rate (I)= 9.75%/12 =0.008125
Number of months (n)= 60
It is paid by Annuity due for 60 months. So we will use present value of Annuity due Formula to Calculate Annuity due
Loan value or Present Value of annuity due formula = Annuity + (Annuity *(1-(1/(1+i)^(n-1)))/i)
36000= P+(P*(1-(1/(1+0.008125)^(60-1)))/0.008125)
36000= P+(46.72360215* P)
36000/47.72360215= P
=754.3437289
So Annuity due payable is $754.34
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