Question

Don James purchased a new automobile for $19,000. Don made a cash down payment of $4,750 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. (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Answer 1

$636.26 ≈ $636

Step-by-step explanation:

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

PV = monthly payment x annuity factor

monthly payment = PV / annuity factor

• PV = $19,000 - $4,750 = $14,250
• PV annuity factor, 2%, 30 periods = 22.3965

monthly payment = $14,250 / 22.3965 = $636.26 ≈ $636