Question

Lush Gardens Co. bought a new truck for $58,000. It paid $6,380 of this amount as a down payment and financed the balance at 4.90% compounded semi-annually. If the company makes payments of $2,100 at the end of every month, how long will it take to settle the loan?

years

months

Express the answer in years and months, rounded to the next payment period

Answer 1

calculation of efective monthly rate
six monthly rate = 4.9%/2 =2.45%
2.45% =(1+r)^6 -1
r =0.40422629%
Calculation of number of months will take to repay the loan
Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period =0.40422629
n=number of period =n
$51620= $2100[ 1-(1+0.0040422629)^-n /0.0040422629]
51620= $2100[ 1-(1.0040422629)^-n /0.0040422629]
n =25.94 months
that means =2 years & 2 months