Question

Arrowood's Camera Store advertises a Canon Power Shot 3.34-megapixel camera for $325, including taxes. If you finance the purchase of this camera for 1 year at an annual percentage rate of 6.9%, find the monthly payment. (Round your answer to the nearest cent.

Answer 1

The payment for a loan based on APR is given by:

$PMT=A(\frac{\frac{r}{n}}{1-(1+\frac{r}{n})^{-nt}})$

Where:

PMT = Payment

A = loan amount

r = annual interest rate

n = number of payments made per year

t = number of years

From the given, we know that

A = 325

r = 0.069

n = 12

t = 1

Substitute the given to the formula

$PMT=325(\frac{\frac{0.069}{12}}{1-(1+\frac{0.069}{12})^{-12(1)}})$$PMT=28.1062\approx28.11$

Now, since we are asked to r