Tim Smith is shopping for a used car. He has found one priced at $3,800. The sal

Question

Tim Smith is shopping for a used car. He has found one priced at $3,800. The salesman has told Tim that if can come up with a down payment of $900, the dealer will finance the balance of the price at an annual rate of 11% over 4 years (48 months). Hint: Use 4 decimal places for the monthly interest rate in all your calculations.

Tim's monthly (end of month) payment amount?

What would Tim's monthly payment be if the dealer were willing to finance the balance of the car price at annual rate of 8% ?

Explanation / Answer

Amount of loan (PV) = 3800 - 900 = 2900

FV = 0

rate = 11%/12

N = 48

use PMT function in Excel

monthly payments = 74.95

2) now put rate = 8%/12 and calculate PV

monthly payments = 70.80

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