Question

I am not sure which formula to use for the following question. Any guidance is appreciated!
Monthly payments, optic mart offers a telescope for $1,249 , including tax. If you finance the purchase of this telescope for 2 years at an annual percentage rate of 7.2% what is the monthly payment?

Answer 1

In this case,

P = $1249

r = 7.2% = 0.072

n = 12 [Compounded Monthly]

t = 2 years

Therefore,

Monthly Payment = rP/ n[1 - (1 + (r/n))^-nt]

= (0.072 * 1249) / 12[1 - (1 + (0.072/12))^{-12* 2}]

= (0.072 * 1249) / 12[1 - (1 + (0.072/12))^-24]

= $56.03

Therefore,

Monthly Payment = $56.03