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2 January, 15:30

You are considering purchasing a new truck that will cost you $34,000. The dealer offers you 1.9% APR within monthly compounding for 48 months (with payments made at the end of the month). Assuming you finance the entire $34,000 and finance through the dealer, your monthly payments will be closest to:

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  1. 2 January, 15:43
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    Answer: $31,513.65

    my monthly payment (principal) would be closest to $31,514

    Explanation:

    Using compound interest formula below to find the principal

    A = p (1 + r/n) ^nt

    A = amount = $34,000

    r = annual nominal rate = 1.9% = 0.019

    n = number of compounding; monthly compounding means 12 interest payments in a year

    P = principal

    t = time in years 48months = 48/12years = 4years

    34,000 = p (1 + 0.019/12) ^12 (4)

    34,000 = p (1 + 0.00158333333) ^48

    34,000 = p (1.00158333333) ^48

    34,000 = 1.07889755p

    Divide both sides by 1.07889755

    P = $31,513.6502

    ≈$31,514 to nearest whole number.
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