Question

11. Terry decided to purchase a $15,999 MSRP vehicle at 4% interest rate for 6years. The dealership offered her a $1700 cash-back incentive, which sheaccepted. Taking all these factors into consideration, what monthly paymentamount can she expect?

Answer 1

For this problem we can use the formula for the monthly payment formula given by:

`P=(r(PV))/(1-(1+r)^(-n))`

Where:

P= represent the monthly payment (desired value)

PV= Present value = $15999-1700 = $14299

r= rate of interest per period = 0.04/12

n= number of periods = 12* 6 = 72 months

And if we replace into the monthly payment formula we got:

`P=((0.04)/(12)(14299))/(1-(1+(0.04)/(12))^(-12\cdot6))=\text{ \$223.710}`

And for this case the monthly payment that she can expect is $223.710