Please do it by type not pics.
1.You wish to buy a $27,500 car. The dealer offers you a 6-year loan with a 7.2 percent APR. What are the monthly payments?
How would the payment differ if you paid interest only?
| a. | Monthly Payment | = | Loan Amount /Present Value of annuity of $ 1 | |||||||||||
| = | $ 27,500 | / | 58.32534 | |||||||||||
| = | $ 471.49 | |||||||||||||
| Working: | ||||||||||||||
| Present Value of annuity of $ 1 | = | (1-(1+i)^-n)/i | Where, | |||||||||||
| = | (1-(1+0.006)^-72)/0.006 | i | 7.2%/12 | = | 0.006 | |||||||||
| = | 58.32534 | n | 6*12 | = | 72 | |||||||||
| b. | Monthly Payment | = | Loan Amount x Monthly Interest Rate | |||||||||||
| = | $ 27,500 | x 7.2% x 1/12 | ||||||||||||
| = | $ 165.00 | |||||||||||||
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