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You want to buy a new sports car from Muscle Motors for $65,500. The contract is in the form of a 60 -month annuity due at an APR of 4.1 percent. What will your monthly payment be?

User Taabouzeid
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Final answer:

To determine the monthly payment for a sports car using an annuity due at a 4.1% APR over 60 months, one must apply the annuity due formula with the given values, considering monthly payments and the 60-month period.

Step-by-step explanation:

To calculate the monthly payment for a $65,500 sports car from Muscle Motors with an annuity due at an APR of 4.1 percent over a 60-month period, you need to use an annuity due formula. An annuity due is a series of equal payments made at the beginning of consecutive periods. The formula to calculate the monthly payment M for an annuity due can be derived from the present value of an annuity due formula: PV = P {[(1 - (1 + i)^-n) / i] * (1 + i)}, where PV is the present value (amount of loan), P is the periodic payment, i is the periodic interest rate, and n is the number of periods.

In your case, since payments are monthly, the periodic interest rate is the APR divided by 12. Therefore, the monthly interest rate i equals 0.041/12. The number of periods n is 60, corresponding to the 60 months of the loan. Substituting the values into the formula and solving for P will give the required monthly payment.

User Kikoralston
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