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 $15,100. He put $2,700 down and financed the rest with a 36-month, 7.5% loan. What is his monthly car payment by table lookup? (Use Table 14.2) (Do not round intermediate calculations. Round your answer to the nearest cent.)

Monthly payment            $

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Explanation / Answer

The amount owed by Cody post down payment = 15100 - 2700 = 12400 $

The annual interest rate = 7.5%

Therefore, monthly interest rate = 7.5/12 = 0.625%

Number of periods of payment = 36 months

Monthly payments of loan is given by formula = NPV * r /(1-(1+r)(-n))

Where NPV represents the net present value of the loan, R is the rate of interest for each month and n is the number of payments to be made

Here,

NPV = 12400 $

R = 0.625%

n = 36 months

Substituting in the formula, the montly payments= (12400*0.0625)/(1-(1.0625)(-36)) = 873.50 $

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