Before purchasing a used car, Cody Lind checked www.kbb.com to learn what he sho

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 $14,750. He put $2,000 down and financed the rest with a 48-month, 7.5% loan.

What is his monthly car payment by table lookup? (Use loan amortization table) (Round your answer to the nearest cent.)

What is his monthly car payment by table lookup? (Use loan amortization table) (Round your answer to the nearest cent.)

Explanation / Answer

Answer

The Carfax was clean so he purchased the used car for $14,750. He put $2,000 down and financed the rest with a 48-month, 7.5% loan.

Loan Amount = Purchase price – down payment

                         = ($14,750 - $2,000)

                         = $ 12750

Monthly interest rate = 7.5% / 12 = 0.625%

Present value = Annuity * [ 1 – {1/(1+r)n }] / r

$ 12750 = Annuity * [1 – {1/(1+0.00625)48 }] / 0.00625

$ 12750 = Annuity * [1 – {1/(1.00625)48 }] / 0.00625

$ 12750 = Annuity * [1 – {1/1.3486}] / 0.00625

$ 12750 = Annuity * [1 – 0.74151] / 0.00625

$ 12750 = Annuity * 0.25848/ 0.00625

$ 12750 = Annuity * 41.35837

Annuity = $ 12750 / 41.35837

Annuity = 308.28

Answer : His monthly car payment by table lookup will be $ 308.28

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