Question

Need help with a problem 16 where the answer is marked wrong (red x) in the photo.

Answer 1

$756.02

EXPLANATION :

The formula for the monthly payments is :

`A=P*((r)/(12)(1+(r)/(12))^n)/((1+(r)/(12))^n-1)`

where A is the monthly payments,

P is the principal amount

r is the rate of interest

and n is the number of payments

From the problem, P = $18000

r = 0.065

n = 2 years x 12 months = 24 payments

The monthly payment will be :

`\begin{gathered} A=18000*((0.065)/(12)(1+(0.065)/(12))^(24))/((1+(0.065)/(12))^(24)-1) \\ A=801.83 \end{gathered}`

Since there are 24 payments, the total payment will be :

$801.8325 x 24 = $19243.98

Comparing with the dealer's financing, which is $20,000

You will save

$20,000 - $19,243.98 = $756.02