Question

Problem #5: You want to buy a car that costs $21,000. The dealer wants a 10% down payment and quotes a 15% APR for a 72-month loan. (a) What will be your monthly payment if the payment is made at the end of each month from the day you buy the car?

Answer 1

a

Loan = price*(1-down%) = 21000*(1-0.1) = 18900

PVOrdinary Annuity = C*[(1-(1+i/(f*100))^(-n*f))/(i/(f*100))]

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

18900= Cash Flow*((1-(1+ 15/1200)^(-6*12))/(15/1200))

Cash Flow = 399.64

Using Calculator: press buttons "2ND"+"FV" then assign

PV =-18900

I/Y =15/12

N =6*12

FV = 0

CPT PMT

Using Excel

=PMT(rate,nper,pv,fv,type)

=PMT(15/(12*100),12*6,,18900,)

b

PVAnnuity Due = c*((1-(1+ i/(f*100))^(-n*f))/i)*(1 + i/(f*100))

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

21000= Cash Flow*((1-(1+ 15/1200)^(-6*12))/(15/1200))*(1+15/1200)

Cash Flow = 438.56

Using Calculator : Press buttons : "2ND"+"PMT"+"2ND"+"ENTER"+"2ND"+"CPT" then assign

PV =-21000

I/Y =15/12

N =6*12

FV = 0

CPT PMT

Using Excel

=PMT(rate,nper,pv,fv,type)

=PMT(15/(12*100),12*6,,21000,1)