Question

Edna decided to purchase a $15,000 MSRP vehicle at a 5% interest rate for 3 years. The dealership offered her a $1500 cash-back incentive, which she accepted. If she takes all these factors into consideration, what monthly payment amount can she expect?

Answer 1

P = A/D, Where P = Monthly payments, A = Total amount owed = 15,000-1,500 = $13,500,

$D= \frac{( 1+ \frac{r}{12} )^{nt} -1}{ \frac{r}{12} (1+ \frac{r}{12}) ^{nt} }$

r = 5% = 0.05, nt = 12*3 = 36

Therefore,
D = $\frac{(1+ 0.05/12)^{36}-1 }{(0.05/12)(1+0.05/12)^{36} }$ = 33.37

Then,

P = 13,500/44.37 = $404.61
The correct answer is c.