You want to buy a new sports car from Muscle Motors for $73,000. The contract is

Question

You want to buy a new sports car from Muscle Motors for $73,000. The contract is in the form of a 60-month annuity due at a 7.00 percent APR. What will your monthly payment be?(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Please show how you got the answer!!

You want to buy a new sports car from Muscle Motors for $73,000. The contract is in the form of a 60-month annuity due at a 7.00 percent APR. What will your monthly payment be?(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Please show how you got the answer!!

Explanation / Answer

Let monthly payment be X. Then according to annuity due formula,

Present value = X * (1 - 1 / (1+r)^n) * (1+r) / (r), where r is monthly interest of 7%/12 and n=60

So, 73,000 = X * (1 - 1 / (1+7%/12)^60) * (1+7%/12) / (7%/12)

73,000 = X * 50.7965

So X = monthly payment = 1437.10

Answer: $ 1,437.10

Hope this helped ! Let me know in case of any queries.

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