Question

An engineering student wants to buy a 2005 Subaru WRX STi for $18,000. Instead of paying for the car in full immediately, the student would like to make monthly payments over two years. At a 12% annual interest rate what would be the amount of the monthly payment

Answer 1

Answer:

$847.33

Explanation:

we can use the present value of an annuity formula to calculate the monthly payment:

present value = monthly payment x PV annuity factor

monthly payment = present value / PV annuity factor

• present value = $18,000
• PV annuity factor, 1%, 24 periods = 21.243

monthly payment = $18,000 / 21.243 = $847.33