Question

Suppose capital one is advertising a 60 month, 5.74% APR motorcycle loan. if you need to borrow $7,200 to purchase your dream Harley Davidson, what will be your monthly payment? (Note: be careful not to round any intermediate steps less then six decimal places.)

Answer 1

EMI :
EMI or Instalment is sum of money due as one of several equal payments for loan/ Mortgage taken today, spread over an agreed period of time.

EMI = Loan / PVAF (r%, n)
PVAF = SUm [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

How to calculate PVAF using Excel:
=PV(Rate,NPER,-1)
Rate = Disc Rate
NPER = No.of periods

Particulars	Amount
Loan Amount	$               7,200.00
Int rate per Month	0.478333%
No. of Months	60

EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per Month & n is No. of Months
= $ 7200 / PVAF (0.0048 , 60)
= $ 7200 / 52.0504
= $ 138.327377
Monthly instalment is $ 138.327377

Pls comment, if any further assistance is required.