Question

You want to buy a new sports car from Muscle Motors for $86,000. The contract is in the form of a 72-month annuity due at an APR of 6.8 percent. What will your monthly payment be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Amount borrowed = $86,000
Annual interest rate = 6.80%
Monthly interest rate = 0.5667%
Period = 72 months

Payments are made in form the form of annuity due which means each payment is made at the beginning of each month.

Let monthly payment be $x

$86,000 = $x + $x/1.005667 + $x/1.005667^2 + … + $x/1.005667^70 + $x/1.005667^71
$86,000 = $x * 1.005667 * (1 - (1/1.005667)^72) / 0.005667
$86,000 = $x * 59.319756
$x = $1,449.77

Monthly payment = $1,449.77

So, your monthly payment will be $1,449.77