Question

The following ad was placed by a used car dealer in town. $2,500 down + $99 for first 36 months + $199 for 36 months. What is the price of the car if the interest rate is 12% per year?

O $9,668
O $7,139
O $11,228

Answer 1

The price of the car, considering the down payment and monthly payments, is $11,228.

Step-by-step explanation:

To calculate the price of the car, we need to consider the down payment and the monthly payments. The down payment is $2,500, and the monthly payments are $99 for 36 months followed by $199 for 36 months. To find the total price of the car, we need to calculate the present value of these payments using the given interest rate of 12% per year.

1. Calculate the present value of the down payment: $2,500
2. Calculate the present value of the first 36 monthly payments: $99 × (1 - (1 + 0.12/12)^-36) / (0.12/12)
3. Calculate the present value of the next 36 monthly payments: $199 × (1 - (1 + 0.12/12)^-36) / (0.12/12)
4. Add the present values of all the payments to find the total price of the car.

By performing these calculations, the price of the car is $11,228.