Question

21. You want to buy a $25,000 car. The company is offering a 2% interest rate for 48 months (4 years). What will your monthly payments be?

Answer 1

Answer: each monthly payment is $502.2

Step-by-step explanation:

We would apply the formula for determining future value involving deposits at constant intervals. It is expressed as

S = R[{(1 + r)^n - 1)}/r][1 + r]

Where

S represents the future value of the investment.

R represents the regular payments made(could be weekly, monthly)

r = represents interest rate/number of interval payments.

n represents the total number of payments made.

From the information given,

S = $25000

r = 0.02/12 = 0.00167

n = 12 × 2 = 48

Therefore,

25000 = R[{(1 + 0.00167)^48 - 1)}/0.00167][1 + 0.00167]

25000 = R[{(1.00167)^48 - 1)}/0.00167][1.00167]

25000 = R[{(1.083 - 1)}/0.00167][1.00167]

25000 = R[{(0.083)}/0.00167][1.00167]

25000 = R[49.7][1.00167]

25000 = 49.78R

R = 25000/49.78

R = 502.2

Answer 2

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Answer:

531.25

Step-by-step explanation:

1)

Y = 2% x 25,000

2) Converting percent to decimal:

p = 2%/100 = 0.02

Y = 0.02 x 25,000

Y = 500

3)

25,000+500=25,500

4)

25,500/48=531.25