Question

Lupe made a down payment of $2500 toward the purchase of a new car. To pay the balance of the purchase price, she has secured a loan from her bank at the rate of 12%/year compounded monthly. Under the terms of her finance agreement she is required to make payments of $200/month for 36 months. What was the cash price of the car? (Round your answer to the nearest cent.)

$

Answer 1

First we need to calculate loan amount. we can use financial calculator for the calculation of loan amount with below key strokes:

interest is compounded monthly. so interest rate will be monthly.

N = loan period = 36; I/Y = monthly interest rate = 12%/12 = 1%; PMT = monthly payment = $200; FV = future value = $0 > CPT = compute > PV = loan amount = $6,021.50

cash price of the car = loan amount + down payment = $ $6,021.50 + $2,500 = $8,521.5