How do you solve for PMT2, for the 2nd part of this problem? Homework: 3.4 Annui

Question

How do you solve for PMT2, for the 2nd part of this problem?

Homework: 3.4 Annuity Present Value & Amortization Save Score: 0.5 of 1 pt 3 of 5 (3 complete) Hw score: 50%, 2.5 of 5 pts Bus Econ 3.4.39 Question Help * You want 10 purchase an automobile ro 27,780 The dealer offers you 0% fnancing for 72 months or a $4,027 rebate You can obtain 57% financing for 72 months at the local bank. Which option should you choose? Rebate 0% financing How much money will you save per month Round to two decimal places)

Explanation / Answer

1.

Payment At 0% finance per month = Purchase price / total months

= 27780/72

= 385.83

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Payment in case of rebate:

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/Frequency = 5.7/12 =

0.475000

FV = Future value =

$0

N = Total payment term x Frequency =

                         72

PV = Present value of Loan = -(27780 - 4027) =

-$23,753.00

CPT > PMT = Payment =

$390.30

Alternate formula-based method:

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

$390.30

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2.

How much money you will save?

Savings = 390.30-385.83 = $4.47

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/Frequency = 5.7/12 =

0.475000

FV = Future value =

$0

N = Total payment term x Frequency =

                         72

PV = Present value of Loan = -(27780 - 4027) =

-$23,753.00

CPT > PMT = Payment =

$390.30

Alternate formula-based method:

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

$390.30

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