Question

You want to buy a new car. You can afford payments of $450 per month and can borrow the money at an interest rate of 6.8% compounded monthly for 3 years.

Answer 1

a	Present value of annuity=	P* [ [1- (1+r)-n ]/r ]
P=	Periodic payment	450.00
r=	Rate of interest per period
	Annual interest	6.80%
	Number of payments per year	12
	Interest rate per period	0.068/12=
	Interest rate per period	0.567%
n=	number of periods:
	Number of years	3
	Periods per year	12
	number of payments	36
	Present value of annuity=	450* [ (1- (1+0.00567)^-36)/0.00567 ]
	Present value of annuity=	14,617.16

Answer is:

14,617.16

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