ANSWER :
$756.02
EXPLANATION :
The formula for the monthly payments is :
[tex]A=P\times\frac{\frac{r}{12}(1+\frac{r}{12})^n}{(1+\frac{r}{12})^n-1}[/tex]
where A is the monthly payments,
P is the principal amount
r is the rate of interest
and n is the number of payments
From the problem, P = $18000
r = 0.065
n = 2 years x 12 months = 24 payments
The monthly payment will be :
[tex]\begin{gathered} A=18000\times\frac{\frac{0.065}{12}(1+\frac{0.065}{12})^{24}}{(1+\frac{0.065}{12})^{24}-1} \\ A=801.83 \end{gathered}[/tex]
Since there are 24 payments, the total payment will be :
$801.8325 x 24 = $19243.98
Comparing with the dealer's financing, which is $20,000
You will save
$20,000 - $19,243.98 = $756.02
