Question

Show all excel formulas used

Ex. 3 JIf a dealer offers you a car at $275 monthly payment for 5 years plus $5,000 down. If you can get a similar loan from a bank at APR of 12%, what is the price that you're paying? Down payment Monthly payment Loan period months APR No. of compounding times per year Monthly rate Present Value Book formula Excel function Ex. 4 If you take out an $10,000 car loan that call for 60 monthly payments at an APR of 12%, what is your monthly payment? What is the EAR? PV of loan Loan period months APR No. of compounding times per year Monthly rate Monthly payment Book formula Excel function EAR

Answer 1

3.

Down Payment = $5,000
Monthly payment = $275
Loan Period = 5 * 12 = 60 months
APR = 12%
No of Compounding = 12 times per year
Monthly rate = 12% / 12 = 1%

Present value using excel Formula:
=PV(rate,nper,pmt,fv)
=PV(1%,60,-275,0)
= $12,362.64

Price = $12,362.64 + 5,000 = $17,362.64

4.
PV of loan = $10,000
Loan period = 60 months
APR = 12%
No.of compounding = 12 times per year
Monthly rate = 12% / 12 = 1%

Monthly payment using excel formula:
=PMT(rate,nper,pv,fv)
=PMT(1%,60,-10000,0)
= $222.44

Monthly payment = $222.44

EAR = (1 + r/m)^m - 1
= (1 + 0.12 / 12)^12 - 1
= 1.01^12 - 1
= 1.1268 - 1
= 0.1268 or 12.68%

EAR = 12.68%