Question

If your monthly payment on 4-year 4% auto loan is $ 280 how much was your...

If your monthly payment on 4-year 4% auto loan is $ 280 how much was your initial loan amount?

Multiple Choice

  • $ 12,790

  • $ 12,401

  • $ 12,669

  • $ 12,230

  • $ 12,385

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Homework Answers

Answer #1

We can solve this problem using Present Value of Annuity formula:


Where,
PVA = Present value of annuity
A = Annuity or payment
i = Interest rate in decimal form
a = Number of payments in a year
n = Number of years

Substituting the values in the formula, we get:

Therefore, the initial loan amount is $12,401.

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