You are considering purchasing a new truck that will cost you $34,000. The deale

Question

You are considering purchasing a new truck that will cost you $34,000. The dealer offers you 1.9% APR financing for 48 months (with payments made at the end of the month). Assuming you finance the entire $34,000 and finance through the dealer, your monthly payments will be closest to __________.

A. $708

B. $725

C. $736

D. $1,086

You are considering purchasing a new truck that will cost you $34,000. The dealer offers you 1.9% APR financing for 48 months (with payments made at the end of the month). Assuming you finance the entire $34,000 and finance through the dealer, your monthly payments will be closest to __________.

A. $708

B. $725

C. $736

D. $1,086

Explanation / Answer

First we need the monthly interest rate = APR/k = .019/12 = .001583 or 1583%.

Using the annuity formula: 34000 = PMT × ( 1 0 . 001583 ) × (1 - 1(1.001583) 48 ) .So PMT = $ 736.15

Answer: C. $736 Monthly payments will be closest to $736, calculation is shown below using the Financial Calculator : I = 1.9%/12 since it is an APR and compounding monthly N = 48 PV = -34,000 PMT = $736.15

First we need the monthly interest rate = APR/k = .019/12 = .001583 or 1583%.

Using the annuity formula: 34000 = PMT × ( 1 0 . 001583 ) × (1 - 1(1.001583) 48 ) .So PMT = $ 736.15

Where: PV = Present Value I = Interest Rate per period N = Number of periods PMT = Payment

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