Question

You want to buy a new sports car from Muscle Motors for $59,000. The contract is...

You want to buy a new sports car from Muscle Motors for $59,000. The contract is in the form of a 72-month annuity due at a 7.25 percent APR.

What will your monthly payment be?

A) $1,027.04 B) $986.77 C) $1,012.99 D) $956.56 E) $1,006.91

Homework Answers

Answer #1
Solution:
Answer is C). $1,012.99
Working Notes:
Monthly Payments = $1,012.99
present value of annuity = Px[ 1-1 /(1 + i)^n)]/ i
P=monthly payment =??
i= interest rate per period = 7.25%/12
n= no. Of period = 72
PV of annuity= Mortgage loan $59,000
present value of annuity = Px[ 1-1 /(1 + i)^n)]/ i
59,000 = P x (1-1/(1+(7.25%/12))^72)/(7.25%/12)
or 59,000 = P x 58.24347185
P= 59,000/58.24347185
P= $1,012.989063
P=$1,012.99
Please feel free to ask if anything about above solution in comment section of the question.
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