You wish to buy a 29500 car The dealer offers you a 4year lo

You wish to buy a $29500 car. The dealer offers you a 4-year loan with a 10 percent APR What are the monthly payments? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Payment per month How would the payment differ if you paid interest only? (Do not round intermediate catculations. Round your final answer to 2 decimal places.) Payment per month Hints References eBook & Resources #1

Solution

Part 1:

Payment = $748.20

P = Principal Loan = (A - DP) =

$29,500.00

R = Rate or APR =

10.00%

N = Number of payments =

                     48

PMT = Payment = P x R/12 x (1+R/12)^N / ((1+R/12)^N - 1)

Payment = Payment in Dollars = 29500 x 10%/12 x (1+10%/12)^48 / ((1+10%/12)^48 -1) =

$748.20

Alternate Method:

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/12*100 =

0.833333

FV =

$0

N = Total terms =

                     48

PV =

-$29,500

CPT > PMT = Monthly Payment =

$748.20

----------------

Part 2:

If only interest is paid:

Payment = Principal x Interest /12

Payment = 29500 x 10%/12

Payment = $245.83

P = Principal Loan = (A - DP) =	$29,500.00
R = Rate or APR =	10.00%
N = Number of payments =	48
PMT = Payment = P x R/12 x (1+R/12)^N / ((1+R/12)^N - 1)
Payment = Payment in Dollars = 29500 x 10%/12 x (1+10%/12)^48 / ((1+10%/12)^48 -1) =	$748.20