Question

HELP!!!!

1. Inez Alexander has a car loan of $425 per month at 5.5% annual interest rate. She would like to pay off the car one year early. About how much will her payoff be?

2. Angelo Gomez has a car loan of $315 per month at 6% annual interest rate. He would like to pay off the car two years early. About how much will his payoff be?

Answer 1

Hi there

The formula of the present value of annuity ordinary is
Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)]
Pv ?
PMT payment per month
R interest rate
K compounded monthly 12 because the payment is monthly
T time

For the first question
Pv=425×((1−(1+0.055÷12)^(−12
×1))÷(0.055÷12))=4,951.26...answer

For the second question
Pv=315×((1−(1+0.06÷12)^(−12
×2))÷(0.06÷12))=7,107.30....answer

Good luck!