You plan to buy a new car. The price is $30,000 and you will make a...

You plan to buy a new car. The price is $30,000 and you will make a down payment of $4,000. Your annual interest rate is 10% and you intend to pay for the car over five years. What will be your monthly payment?

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Expert Solution

Solution:-

Annual interest rate = 10% and t = 5years = 5 * 12 = 60 payments

=> 30,000 = 4,000 + CF/(1+0.1/12) + CF/(1+0.1/12)² +--------+ CF/(1+0.1/12)⁶⁰

=> 26,000 = CF/(1+0.1/12) + CF/(1+0.1/12)² +--------+ CF/(1+0.1/12)⁶⁰

=> 26,000 = CF * (12/0.1) * [1-1/(1.0083)⁶⁰]

26,000 = CF * 120 * 0.391004

26,000 = CF * 46.92055

CF = 26,000/46.92055

= $554.12

Our monthly payment will be $554.12

jeff jeffy answered 1 year ago

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