Question

Don James purchased a new automobile for $20,000. Don made a cash down payment of $5,000 and agreed to pay the remaining balance in 30 monthly installments, beginning one month from the date of purchase. Financing is available at a 24% annual interest rate. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Calculate the amount of the required monthly payment. (Round your final answer to nearest whole dollar amount.)

Answer 1

monthly payment = $669.76

Step-by-step explanation:

using the present value of an annuity formula we can determine the monthly payment:

monthly payment = present value of an annuity / PV annuity factor

• present value of an annuity = $20,000 - $5,000 = $15,000
• PV annuity factor 2%, 30 periods = 22.396

monthly payment = $15,000 / 22.396 = $669.76