A car was bought on instalment basis with a monthly installm

A car was bought on instalment basis with a monthly installment P10,000.00 for 6 months. If interest is 12% compounded annually, calculate the cash price of the car.

Solution

Monthly instalment = P10000

Time n = 6 months

Monthly interest rate R = 12%/12 = 1%

Then,

Cash price = present value of the monthly instalments

Cash price = 10000*(1-1/(1+R)^n)/R

Cash price = 10000*(1-1/1.01^6)/.01

Cash price = P57954.76

So, the cash price of the car will be, P57954.76.