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Suppose that you own a local auto dealership, Carmen and Rodrigo’s Sales (CARS). Your dealership will...

Suppose that you own a local auto dealership, Carmen and Rodrigo’s Sales (CARS). Your dealership will finance a new car purchase at an APR of 13%, compounded monthly. The terms of the financing are monthly payments of $251 for five years. The first payment is due one month after the buyer purchases the vehicle. How much of the purchase price would the buyer be financing with the loan from your dealership?

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Answer #1

APR = 13% compounded monthly

Monthly Payment = $251

Loan Period = 5 years

Loan Amount = PV of monthly payments

Using TMV calculation,

PV = [FV= 0, R = 13%, T = 60, PMT = 251]

PV = $11,031.48

So, Loan Financed = $11,031.48

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