SOLUTION: Valley Auto sold a used car priced at $10 600 for 10% down and the balance to be paid in equal monthly payments over four years at 7.2% compounded monthly. How much does the buyer
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Question 1207350: Valley Auto sold a used car priced at $10 600 for 10% down and the balance to be paid in equal monthly payments over four years at 7.2% compounded monthly. How much does the buyer have to pay at the end of each month? Found 2 solutions by Theo, ikleyn:Answer by Theo(13342) (Show Source):
you ant to find the present value of the payments made at the end of each month for 4 years.
the amount of the loan is the present value.
this is equal to 10,600 minus .10 * 10600 = 9540.
your input are:
present value = 9540
future value = 0
number of time periods = 4 * 12 = 48 months.
interest rate per time period = 7.2 per yer / 12 = .6% per month.
payments are made at the end of each month.
click on pmt and the calculator tells you that you will have to pay 229.33 at the end of each month for the next 48 months to satisfy the loan.
You can put this solution on YOUR website! .
Valley Auto sold a used car priced at $10 600 for 10% down and the balance to be paid
in equal monthly payments over four years at 7.2% compounded monthly.
How much does the buyer have to pay at the end of each month?
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With the discount of 10%, you actually buy a used car for 0.9*10600 = 9540 dollars.
You pay back for your purchase by equal parts in 4 years as a loan. They want you find your monthly payment.
Use the formula for the monthly payment for a loan
M =
where P is the loan amount; r = = 0.006 is the effective interest rate per month;
n is the number of payments (same as the number of months, or 4*12 = 48); M is the monthly payment.
In this problem P = $9540; r = 0.006.
Substitute these values into the formula and get for monthly payment
M = = = 229.3334.
Round it to the closest cent. You will get the ANSWER: the monthly payment is $229.33.
In total, you will pay 4*12*229.33 = 11,007.84 dollars in 4 years.
The difference $11.007.84 - $9540 = $1,467.84 is the interest you pay to financial company.
Solved.
To see many other similar solved problems, look into the lesson
- Loan problems
in this site.
