Question

You want to buy a new sports car from Muscle Motors for $37,000. The contract is in the form of an annuity due for 36 months at an APR of 9.50 percent.

  

What will your monthly payment be?

Answer 1

Price of Car = $37,000

Annuity Period = 36 months

Annual interest rate = 9.5%

Monthly Interest rate = 9.5%/12 = 0.7917%

Monthly loan payment can be calculated using PMT function in spreadsheet

PMT(rate, number of periods, present value, future value, when-due)

Where, rate = Monthly Interest rate = 0.7917%

number of periods = Loan Period = 36 months

present value = price of car = $37,000

future value = 0

when-due = when is the payment made each month = beginning = 1

payment is made at the beginning since it is an annuity due

Monthly loan payment = PMT(0.7917%, 36, 37000, 0, 1) = $1,175.91