Question

You want to buy a sports car for $58,000. The contract is for 60-months with an APR of 4.3%. You have the option to make the first payment today (annuity due) or one month from now (ordinary annuity). How much less will your payments be if you decide to begin making your payments today?

Round your answer to two decimal places.

Answer 1

We shall use financial calculator for the same.

Here:

N	60
I/Y	0.36%	4.3%/12
FV	0
PV	$       58,000.00
CPT PMT	$          1,076.03

Now setting the TMV function on calculator to beginning period.

2nd and PMT key shall be pressed

N	60
I/Y	0.36%
FV	0
PV	$       58,000.00
CPT PMT	$          1,072.19

Hence if payments begin today less payments shall be $1076.03-$1072.19=$3.84