Question

	Jetta's price	Financing offered (annual %)	Term (months)
Dealership 1	$26,000	4.75%	48
Dealership 2	$20,000	3.75%	48
Dealership 3	$19,000	6.50%	48

Create data table that describes how your monthly payment changes with he Jetta's price and annual interest rate. (10 pts)

	$26,000	$20,000	$19,000
4.75%
3.75%
6.50%

(d) Which dealership offers you the lowest monthly payment? (2 pts)

Answer 1

a)		$ 26,000.00	$20,000.00	$ 19,000.00
	4.75%	$     595.82	$     458.32	$     435.41
	3.75%	$     584.15	$     449.35	$     426.88
	6.50%	$     616.59	$     474.30	$     450.58
	Formula to be used is the loan amortization formula, which is:
	PMT = Loan amount*((r/12)*(1+r/12)^n))/((1+r/12)^n-1))
	where r = the annual interest rate in decimals
	r/12 = monthly interest rate in decmials
	n = number of months = 48
	CALCULATIONS:
	$26000 and 4.75% interest. PMT = 26000*(0.0475/12)*(1+0.0475/12)^48/((1+0.0475/12)^48-1)) =							$       595.82
	$20000 and 4.75% interest. PMT = 20000*(0.0475/12)*(1+0.0475/12)^48/((1+0.0475/12)^48-1)) =							$       458.32
	$19000 and 4.75% interest. PMT = 19000*(0.0475/12)*(1+0.0475/12)^48/((1+0.0475/12)^48-1)) =							$       435.41
	$26000 and 3.75% interest. PMT = 26000*(0.0375/12)*(1+0.0375/12)^48/((1+0.0375/12)^48-1)) =							$       584.15
	$20000 and 3.75% interest. PMT = 20000*(0.0375/12)*(1+0.0375/12)^48/((1+0.0375/12)^48-1)) =							$       449.35
	$19000 and 3.75% interest. PMT = 19000*(0.0375/12)*(1+0.0375/12)^48/((1+0.0375/12)^48-1)) =							$       426.88
	$26000 and 6.50% interest. PMT = 26000*(0.065/12)*(1+0.065/12)^48/((1+0.065/12)^48-1)) =							$       616.59
	$20000 and 6.50% interest. PMT = 20000*(0.065/12)*(1+0.065/12)^48/((1+0.065/12)^48-1)) =							$       474.30
	$19000 and 6.50% interest. PMT = 19000*(0.065/12)*(1+0.065/12)^48/((1+0.065/12)^48-1)) =							$       450.58
b)	Dealership 2, with $20000 price and 3.75% interest offers the lowest monthly payment.