(20) Suppose you purchase a new car today for S25,000, using S5,000 of your own

Question

(20) Suppose you purchase a new car today for S25,000, using S5,000 of your own money and financing the rest through a loan that requires payments at the end of each month for 48 consecutive months. The loan's annual interest rate is 3% and the first payment is due in one month. Which of the following comes closest to the monthly payment on the loan? Tip: In some cases the time period shifts from annual tonon-annual The TVM formulas can handle cases such as these by making two changes:()by multiplying some other yalue for different payments, and (2) dividing the annual interest rate by 12 for monthly pavments, by 52 for weekly pavments,or by some other value for different payments.In this problem, since we 're searching for the monthly payment, the time period will be defined as thenumber of months, and the interest rate will be defined as the annual rate divided by 12. A. S442.68 B. S448.38 C. S581.62 D. S589.22 E. S669.70

Explanation / Answer

Here dividing 48 months means 4 years by number of by 12 for monthly paymets i.e 4/12=0.333

dividing interest rates by 12 for month=3/12=0.25.

so Equal monthly installment formula=p(r.1+r)*n/(1+r)*n-1

so after submitting given values the answer is 442.68$.

so answer is option A i.e 442.68$.

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