Question

Yagoda is buying a used car. Payments will be $348.75 every month for 3 years, with the first payment at the end of 12 months. The interest rate is 7.250% compounded bi-weekly. What is the equivalent cash price of the car?

a. X=$10,318.09.
b. None of the other answers is correct.
c. X=$10,107.51.
d X=$10,528.66.
e X=$11,319.20.

Answer 1

The equivalent cash price of the car is $10,318.09.

Step-by-step explanation:

To find the equivalent cash price of the car, we need to calculate the present value of the monthly payments. The formula to calculate the present value of an annuity is:

Present Value = Payment Amount * (1 - (1 + Interest Rate / Number of Compounds) ^ (-Number of Compounds * Number of Years)) / (Interest Rate / Number of Compounds)

Plugging in the given values:

Present Value = $348.75 * (1 - (1 + 0.0725 / 26) ^ (-26 * 3)) / (0.0725 / 26)

After solving the equation, the equivalent cash price of the car is approximately $10,318.09.