Question

3c2.

A commercial bank will loan you $52,207 for 7 years to buy a car. The loan must be repaid in equal monthly payments at the end of the month. The annual interest rate on the loan is 18.98 percent of the unpaid balance. What is the amount of the monthly payments?

Round the answer to two decimal places.

3b2.

What is the present value of the following annuity?
$3,185 every half year at the beginning of the period for the next 15 years, discounted back to the present at 7.78 percent per year, compounded semiannually.

Round the answer to two decimal places.

Answer 1

1)

Pv of loan = $52,207

Number of instalments (nper) = 7* 12 = 84 months

Annual rate = 18.98%

Monthly rate = 18.98%/12

Amount of monthly payments (PMT) = = $ 1,127.47

2)

Annuity amount (PMT) = $3,185

Number of periods(nper) = 15 *2 = 30 periods

Rate = 7.78%/2 per half year

PV of the annuity = = $ 57,989.55