Question

You want to buy a new sports car for $55,000. The contract is in the form of a 60-month “annuity” at a 6 percent APR, compounded monthly. What will your monthly payment be? (Show work)

$1,072.11

$1,047.90

$1,063.30

$1,053.87

$1,067.13

Answer 1

Monthly Payment = Loan Amount / PVAF(r%, n)

PVAF = Sum PVF

PVF(r%, n) = 1/(1+r)^n

Monthly Payment = Loan Amount / PVAF(r%, n)

= $ 55,000 / PVAF(0.5%,60)

= $ 55,000 / 51.7256

= $ 1063.30

OPtion C is correct.