Question

QUESTION 1

You bought a car and will pay back $306 per month for 48 months. If the rate is 4.49%, what is how much did you borrow?

QUESTION 2

You would like to have $37,330 in 18 years.. If the rate is 7.19%, how much do you have to invest each year?

Answer 1

1. The amount is computed as shown below:

Present value = Monthly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

r is computed as follows:

= 4.49% / 12 (Since there are monthly repayments, hence divided by 12)

= 0.374166667%

So, the amount is computed as follows:

= $ 306 x [ (1 - 1 / (1 + 0.00374166667)⁴⁸ ) 0.00374166667 ]

= $ 306 x 43.86161156

= $ 13,421.65 Approximately

2. The amount is computed as shown below:

Future value = Annual payment x [ [ (1 + r)ⁿ – 1 ] / r ]

$ 37,330 = Annual payment x [ [ (1 + 0.0719)¹⁸ - 1 ] / 0.0719 ]

$ 37,330 = Annual payment x 34.62600654

Annual payment = $ 37,330 / 34.62600654

Annual payment = $ 1,078.09 Approximately

Feel free to ask in case of any query relating to this question