Question

To buy a brand-new car, 60 monthly payments of $325.00 will be needed to settle the car loan with a $4500 down payment. Determine the price of the car if the interest rate is 8.7% compounded monthly. ($20,266.70) Cannot use Excel!

Answer 1

Question ask to calculate the price of the car.

Given information: Down Payment = $4500, Monthly payment = $325, no. of intallments = 60, Rate = 8.7%

Periodic rate = 8.7 / 12 =0.725%

1. First calculate the amount of loan

Loan Amount = Monthly payment x Cumulative discounting factor @0.725% for 60 periods

[ For cumulative discount factor refer to you Cumulative pv table or you can calculate the as it is sum of (100/100.725)+ (100/100.725)² + ................ (100/100.725)⁶⁰ ]

= 325 x 48.51293484

= 15766.70 approx

2. Add the down payment in loan amount to calculate the cost of car

= Car price = Loan Amount + Down payment

= 15766.70 + 4500

Price of the car = $20266.70