Suppose your friend Bill is considering buying a Ford F150 Lariat truck. He is going to...
Suppose your friend Bill is considering buying a Ford F150 Lariat truck. He is going to make monthly payments (at the end of each month) of $819.48 on a loan of $47,000. If the annual percentage rate is 7.80% how long in years is the loan for? Please show ALL work with finance formulas.
Homework Answers
We can solve this using PV of annuity formula:
PV of annuity = P(1-((1+r)^-n))/r
|
r |
0.078/12=0.0065 |
|
n |
? |
|
P |
819.48 |
|
PV |
47,000 |
Where r is the rate and n is the number of period. P is the payment per period
Substituting values we have:
47000= 819.48(1-((1+0.0065)^-n))/0.0065
n=72 months or 6 years
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