Question

g Mr. Brown wants to buy a Tesla Model S car, whose price is $100, 848. The dealer offers a loan plan: $30, 000 downpayment, $X at the end of year 1, year 2, year 3, and year 4. Assume the constant annual interest rate is 25%. (a) What is X

Answer 1

$30,000

Step-by-step explanation:

the present value of the loan = $100,848 - $30,000 = $70,848

we can use the present value annuity formula:

PV = annual payment x PV annuity factor

annual payment = PV / PV annuity factor

PV = $70,848

PV annuity factor, 25%, 4 periods = 2.3616

annual payment = $70,848 / 2.3616 = $30,000