We know a car can be had for 60 monthly payments of 399 The

We know a car can be had for 60 monthly payments of $399. The dealer has set us a nominal interest rate of 4.5% compounded daily. What is the purchase price?

Solution

let purchase price be p paid when the car is purchased

future value of purchase price = 60*399 = 23940, 60 months = 5 years

FV = p*(1 + 0.045/365)^(365*5) = 1.252p

1.252p = 23940

p = 19121

purchase price before interest = $19121