Sam Weber finances a new automobile by paying $6,000 cash and agreeing to make 2
ID: 2473442 • Letter: S
Question
Sam Weber finances a new automobile by paying $6,000 cash and agreeing to make 20 monthly payments of $430 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.)
Sam Weber finances a new automobile by paying $6,000 cash and agreeing to make 20 monthly payments of $430 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.)
Explanation / Answer
Calculation of Cost of the automobile:
Cash Payment
$ 6,000.00
Add: Present Value of Monthly Payments:
Monthly Payment =
$ 430.00
Interest % (Monthly) = 12%/12 =
1%
Number of Months =
20
Present value of annuity $ 1 (1%, 20 Periods)
18.0456
Present Value = monthly payment * Present value of annuity $ 1 = 430*18.0456 =
7,759.61
Cost of the automobile = 6000 + 7759.61 =
13,759.61
Calculation of Cost of the automobile:
Cash Payment
$ 6,000.00
Add: Present Value of Monthly Payments:
Monthly Payment =
$ 430.00
Interest % (Monthly) = 12%/12 =
1%
Number of Months =
20
Present value of annuity $ 1 (1%, 20 Periods)
18.0456
Present Value = monthly payment * Present value of annuity $ 1 = 430*18.0456 =
7,759.61
Cost of the automobile = 6000 + 7759.61 =
13,759.61
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