Question

You are considering buying a new car. The sticker price is $85,000 and you have $25,000 to put toward a down payment. If you can negotiate a nominal annual interest rate of 6.5 percent and you wish to pay for the car over a 5 year period, what are your monthly car payments? DO NOT USE EXCEL

Answer 1

Monthly Car payment

$ 1,173.98

Working;

# 1

Price

$       85,000

Less down payment

$       25,000

Loan amount

$       60,000

# 2

Present value of annuity of 1

=

(1-(1+i)^-n)/i

Where,

=

(1-(1+0.005417)^-60)/0.005417

i

6.5%/12

=

0.005417

=

51.1081902

n

5*12

=

60

# 3

Monthly Car payment

=

Loan amount / Present value of annuity of 1

=

$       60,000

/

51.10819

=

$   1,173.98