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You are planning to purchase a new Volkswagen Jetta that on average sells for $20,000. You...

You are planning to purchase a new Volkswagen Jetta that on average sells for $20,000. You can secure 4% annual interest rate if you decide to finance the purchase. You're planning to borrow money for 48 months, repaying in equal monthly payments at the beginning of each month

What is the monthly payment?

Solutions

Expert Solution

PV of annuity due =Annuity+ Annuity*(1-1/(1+rate)^(number of periods-1))/rate

Here rate = 4%/12 = 0.33333%

20000 = Annuity + Annuity*(1-1/(1+0.0033333)^47)/0.0033333

20000= Annuity+ Annuity*43.4365

Annuity = 450.08

Hence Monthly payment = $450.08

jeff jeffy answered 1 year ago
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