Kangaroo Autos is offering free credit on a new $12,000 car. You pay $1,800 down

Question

Kangaroo Autos is offering free credit on a new $12,000 car. You pay $1,800 down and then $340 a month for the next 30 months. Turtle Motors next door does not offer free credit but will give you $1,040 off the list price.

If the rate of interest is 10% a year (about 0.83% a month), calculate the present value of the payments to Kangaroo Autos.

Kangaroo Autos is offering free credit on a new $12,000 car. You pay $1,800 down and then $340 a month for the next 30 months. Turtle Motors next door does not offer free credit but will give you $1,040 off the list price.

Explanation / Answer

Present value of annuity = P×[1-(1÷(1+r)^n))]÷r

r is interest rate per period

P is payment per period

n is number of payments

= $340×[1-(1÷(1+0.83%)^30))]÷0.83%+$1,800

= $10,796

Turtle motors price = $10,960

Kangaroo autos is offering better deal.

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.