Dave krug finances a new automobile by paying $6,500 cash and agreeing to make 40 monthly payments of $500 each, the first payment to be made one month after the purchase. the loan bears interest at an annual rate of 12%. what is the cost of the automobile?

Question

Rashad

Mathematics

7 December, 04:38

Dave krug finances a new automobile by paying $6,500 cash and agreeing to make 40 monthly payments of $500 each, the first payment to be made one month after the purchase. the loan bears interest at an annual rate of 12%. what is the cost of the automobile?

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Answers (1)

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Ernesto Pope · Answer 1

P = (C - down payment) * D

D = [i/12]/[1 - (1+i/12) ^-12n] = [0.12/12]/[1 - (1+0.12/12) ^-40] = 0.03046

Therefore,

500 = (C-6,500) * 0.03046

C-6,500 = 500/0.03046 = 16,417.34

C = 22,917.34

The cost of the automobile was $22,917.34