Question

You want to buy a new sports car from Muscle Motors for $58,000. The contract is in the form of a 48-month annuity due at a 6.50 percent APR.

Required:

What will your monthly payment be?

1. $1,395.42
2. $1299.65
3. $1,340.70
4. $1,368.06
5. $1,375.47

Answer 1

Information provided:

Present value= $58,000

Time= 48 months

Interest rate= 6.50%/12= 0.5417% per month

The question is concerning finding the monthly payment of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

The question can also be solved by entering the below in a financial calculator in BGN mode:

PV= -58,000

N= 48

I/Y= 0.5417

Press the CPT key and PMT to compute the amount of monthly payment.

The value obtained is 1,368.0570.

Therefore, the monthly payment is $1,368.0570   $1,368.06.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.