Suppose you can get a 24-month, 6% APR loan (monthly compounding) to buy the just released iphone 11 Pro Max, which is priced at $1,099 (suppose you do not have sales tax in your state). What will your monthly payment be?
Monthly payment will be $ 48.71
| Monthly Payment | = | Loan amount | / | Present Value of annuity of 1 | |||||
| = | $1,099.00 | / | 22.56286622 | ||||||
| = | $48.71 | ||||||||
| Working: | |||||||||
| Loan amount is equal to the price of iphone 11 Pro Max. | |||||||||
| Present Value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||
| = | (1-(1+0.005)^-24)/0.005 | i | = | 6%/12 | = | 0.005 | |||
| = | 22.56286622 | n | = | 24 | |||||
| Alternatively, | |||||||||
| Monthly Payment | =-PMT(rate,nper,pv,fv) | ||||||||
| = $48.71 | |||||||||
| Where, | |||||||||
| rate | = | 0.005 | |||||||
| nper | = | 24 | |||||||
| pv | = | $1,099.00 | |||||||
| fv | = | 0 |
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