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1. You decide to buy a new car. You negotiate with the dealerand get...

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Accounting

1. You decide to buy a new car. You negotiate with the dealerand get the car for $40,000. What will be your monthly payment ifyou finance the purchase through your bank with a 6-year, 11% autoloan (assume no down payment).

a. What if you made a down payment of $4,000? What would be themonthly payment for the car?

Answer & Explanation Solved by verified expert
3.6 Ratings (663 Votes)

1)
Monthly payment = Loan amount / Present value of annuity of 1
= $           40,000 / 52.53735
= $           761.36
Working:
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= 52.5373463 i = 11%/12 = 0.009167
n = 6*12 = 72
2)
Monthly payment = Loan amount / Present value of annuity of 1
= $           36,000 / 52.53735
= $           685.23
Working:
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= 52.5373463 i = 11%/12 = 0.009167
n = 6*12 = 72

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Transcribed Image Text

In: Accounting1. You decide to buy a new car. You negotiate with the dealerand get the...1. You decide to buy a new car. You negotiate with the dealerand get the car for $40,000. What will be your monthly payment ifyou finance the purchase through your bank with a 6-year, 11% autoloan (assume no down payment).a. What if you made a down payment of $4,000? What would be themonthly payment for the car?

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