While buying a new car, Ali made a down payment of $800 and agreed to make...

Question

Question

business finance

Answer 1

Answer #1

Effective rate = (1 + r / n)^n - 1
= (1 + 3% / 2)^2 - 1
= 3.0225%

Monthly rate = (1 + 3.0225%)^(1/12) - 1 = 0.24845%

PMT = 260

Nper = (5 * 12) + 7 = 67

FV = 0

Loan amount can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(0.24845%,67,-260,0)
= $16,029.03

Purchase price = Down payment + loan amount
= $800 + $16,029.03
= $16,829.03

Purchase price of the car = $16,829.03

Answer 2

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