Question

The price of a new car is $40,000. Assume that an individual makes a down payment of 25% toward the purchase of the car and secures financing for the balance at the rate of 6%/year compounded monthly. (Round your answers to the nearest cent.) (a) What monthly payment will she be required to make if the car is financed over a period of 36 mo? Over a period of 48 mo? 36 mo $ 48 mo $ (b) What will the interest charges be if she elects the 36-mo plan? The 48-mo plan? 36 mo $ 48 mo $

Answer 1

solution: Part a: calculation of monthly payment for 36 month Car price Less : down payment at 25% Financing / PVIFA(0.75%/12,36)** Monthly payment ** working : Interest rate per month=6%/12 0.50% 40000 -10000 30000 32.87102 912.66 PVIFA(R%,n) PVIFA(0.50%/12,36) PVIFA(0.50%/12,48) (1-(1+r)^-n)/r (1-(1+0.0050)^-36)/0.0050 32.871016 (1-(1+0.0050)^-48)/0.0050 | 42.580318 calculation of monthly payment for 48 month Financing / PVIFA(0.75%/12,48)** Monthly payment 30000 42.58032 704.55 912.6581235 Part b: calculation of interest charges with 36 month financing Monthly payment x Period Total monthly payments Less : Financing Interest charges 32855.69 -30000.00 2855.69 704.5508714 calculation of interest charges with 36 month financing Monthly payment x Period Total monthly payments Less : Financing Interest charges 33818.44 -30000.00 3818.44 Sheet405 Sheet406 Sheet407 Sheet408 Sheet409 Sheet410 Sheet411 Sheet412 Sheet413 III A III ENG UK 15:20 26/10/2019