Amby Dextrous bought a grand piano, make a down payment of $1500, and agreed to a...

Amby Dextrous bought a grand piano, make a down payment of $1500, and agreed to a series of monthly payments of $225 for 4 years starting the date of sale. The rate of interest is 13% compounded monthly.

(a) Calculate the cash price

ANSWER: __________________________

(b) How much of the total payments will be interest?

ANSWER: __________________________

Expert Solution

(a)	Cash Price	=	Down Payment	+	Present Value of monthly cash flow
		=	$ 1,500.00	+	$ 8,386.92
		=	$ 9,886.92

	Working:
	Present Value of monthly cash flow	=pv(rate,nper,pmt,fv,1)	Where,
		= $ 8,386.92			rate	=	13%/12	=	0.010833
					nper	=	4*12	=	48
					pmt			=	$ -225.00
					fv			=	0


(b)	Interest		$ 2,413.08

Working:

	Total repayment	=	$ 225.00	*	48	=	$ 10,800.00

	Loan amount					$ 8,386.92

	Interest Paid					$ 2,413.08

jeff jeffy answered 2 years ago

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