Question

Problem #5: You want to buy a car that costs $21,000. The dealer wants a 10% down payment and quotes a 15% APR for a 72-month
(b) What will be your monthly payment if you tell the dealer that you will not make any down payment, but you will make your
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Answer #1

a

Loan = price*(1-down%) = 21000*(1-0.1) = 18900

PVOrdinary Annuity = C*[(1-(1+i/(f*100))^(-n*f))/(i/(f*100))]
C = Cash flow per period
i = interest rate
n = number of payments I f = frequency of payment
18900= Cash Flow*((1-(1+ 15/1200)^(-6*12))/(15/1200))
Cash Flow = 399.64
Using Calculator: press buttons "2ND"+"FV" then assign
PV =-18900
I/Y =15/12
N =6*12
FV = 0
CPT PMT
Using Excel
=PMT(rate,nper,pv,fv,type)
=PMT(15/(12*100),12*6,,18900,)

b

PVAnnuity Due = c*((1-(1+ i/(f*100))^(-n*f))/i)*(1 + i/(f*100))
C = Cash flow per period
i = interest rate
n = number of payments I f = frequency of payment
21000= Cash Flow*((1-(1+ 15/1200)^(-6*12))/(15/1200))*(1+15/1200)
Cash Flow = 438.56
Using Calculator : Press buttons : "2ND"+"PMT"+"2ND"+"ENTER"+"2ND"+"CPT" then assign
PV =-21000
I/Y =15/12
N =6*12
FV = 0
CPT PMT
Using Excel
=PMT(rate,nper,pv,fv,type)
=PMT(15/(12*100),12*6,,21000,1)
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