Question

You want to buy a new sports car from Muscle Motors for $31,500. The contract is in the form of a 36-month annuity due at an APR of 6.25 percent. What will your monthly payment be? Also can you show the inputs like the N and I/Y Etc

Answer 1

To calculate the monthly payment for a 36-month annuity due at an APR of 6.25 percent on a $31,500 car, use the annuity formula with the inputs PV = $31,500, i = APR/12, and n = 36. The monthly interest rate is 0.0625/12, and payments are made at the beginning of each period. Input these values into a financial calculator to find the monthly payment.

Step-by-step explanation:

Calculating the monthly payment for a car loan requires the use of the annuity formula for payments on an annuity due. Since this loan is an annuity due, the payments are made at the beginning of each period. The formula to calculate the payment (R) is:

PV = R * [ 1 - (1 + i)-n ] / i

Where:

• PV is the present value or amount of the loan, which is $31,500
• R is the monthly payment
• i is the monthly interest rate (6.25% APR convertible monthly equates to 0.0625/12 per month)
• n is the total number of payments, which is 36 months

Now let's solve for R using the inputs of the given loan details:

1. PV = $31,500
2. i = 0.0625 / 12
3. n = 36

Using a financial calculator or spreadsheet function, inputting these values will provide the monthly payment figure.