Landon Wallin is an auto mechanic who wishes to start his own business. He will need...
Landon Wallin is an auto mechanic who wishes to start his own business. He will need $3800 to purchase tools and equipment. Landon decides to finance the purchase with a 48-month fixed installment loan with an APR of 5.5%.
a) Determine Landon's finance charge.
b) Determine Landon's monthly payment.
Homework Answers
| a) | Finance charge | $ 441.95 | ||||||||
| Working: | ||||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | |||||||
| = | (1-(1+0.004583)^-48)/0.004583 | i | 5.5%/12 | = | 0.004583 | |||||
| = | 42.999114 | n | 48 | |||||||
| Monthly payment | = | Amount borrowed | / | Present value of annuity of 1 | ||||||
| = | $ 3,800.00 | / | 42.999114 | |||||||
| = | $ 88.37 | |||||||||
| Finance charge | = | Amount repaid | - | Amount borrowed | ||||||
| = | (48*$88.37) | - | $ 3,800.00 | |||||||
| = | $ 441.95 | |||||||||
| b) | Monthly payment | $ 88.37 | ||||||||
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