Question

You want to buy a new sports car from Muscle Motors for $68,500. The contract is in the form of a 60-month annuity due at an APR of 4.5 percent. What will your monthly payment be

Answer 1

Monthly payment= $1,277.05

Step-by-step explanation:

First, we need to calculate the future value of the loan:

FV= PV*(1+i)^n

i= 0.045/12= 0.00375

n= 60

FV= 68,500*(1.00375^60)

FV= $85,748.01

Now, we can determine the monthly payment (PMT). The PMT is given by the equation

PMT= (FV*i)/{[(1+i)^n]-1

PMT= (85,748.01*0.00375) / [(1.00375^60) - 1]

PMT= $1,277.05