Question

14 of 20 (12 complete) HV. Score: 0 of 1 pt 8.6.5 Suppose that you are thinking about buying a car and have narrowed down your choices to two options The new car option: The new car costs $32,000 and can be financed with a five-year loan at 6.63%. The used car option: A three year old model of the same car costs $13,000 and can be financed with a five-year loan at 5.56%. What is the difference in monthly payments between financing the new car and financing the used car? Use PMT = The difference in monthly payments between financing the new car and financing the used car is $ (Round to the nearest cent as needed.) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All QUITO arch

Answer 1

annuity formula is

PMT = PV*(r/n)/(1 - (1+r/n)^(-n*t))

For option A

PMT = 32000*(0.0663/12)/(1 - (1+0.0663/12)^(-5*12)) = $628.07

For option B,

PMT = 13000*(0.0556/12)/(1 - (1+0.0556/12)^(-5*12)) = $248.68

difference between monthly payment = 628.07-248.68 = $379.39