Before purchasing a used car, Cody Lind checked www.kbb.com to learn what he sho
ID: 2337348 • Letter: B
Question
Before purchasing a used car, Cody Lind checked www.kbb.com to learn what he should offer for the used car he wanted to buy. Then he conducted a carfax.com search on the car he found to see if the car had ever been in an accident. The Carfax was clean so he purchased the used car for $14,850. He put $2,200 down and financed the rest with a 48-month, 7.5% loan.
What is his monthly car payment by formula? (Round your answer to the nearest cent.)
Before purchasing a used car, Cody Lind checked www.kbb.com to learn what he should offer for the used car he wanted to buy. Then he conducted a carfax.com search on the car he found to see if the car had ever been in an accident. The Carfax was clean so he purchased the used car for $14,850. He put $2,200 down and financed the rest with a 48-month, 7.5% loan.
Explanation / Answer
Using present value of annuity formula , we can calculate monthly car payment. Present value of annuity = P x {[1 - (1+r)^-n]/r} Present value of annuity = Loan amount = $14850 - $2200 = $12650 P = monthly car payment = ? r = rate of interest per month = 7.5%/12 = 0.00625 n = no.of months = 48 12650 = P x {[1 - (1+0.00625)^-48]/0.00625} 12650 = P x 41.35837 P = 305.86 Monthly car payment = $305.86
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