You want to buy a new sports car from Muscle Motors for $71,000. The contract is in the form of a 72-month annuity due at an APR of 6.9 percent. What will your monthly payment be?

You want to buy a new sports car from Muscle Motors for $71,000. The contract is in the form of a 72-month annuity due at an APR of 6.9 percent. What will your monthly payment be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

Monthly payment

$

 

Explanation:

The time line is:

0	1								71	72
−$71,000
C	C	C	C	C		C	C	C	C

We need to use the PVA due equation, that is:

  

PVAdue = (1 + r) PVA

Using this equation:

PVAdue = $71,000 = [1 + (.069 / 12)] × C[{1 – 1 / [1 + (.069 / 12)]72} / (.069 / 12)]

$70,594.08 = $C{1 – [1 / (1 + .069 / 12)72]} / (.069 / 12)

C = $1,200.17

Notice, to find the payment for the PVA due we simply compound the payment for an ordinary annuity forward one period.

   

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

2nd BGN  2nd SET

 
 

Enter

72

6.9% / 12

$71,000

N

I/Y

PV

PMT

FV

Solve for

$1,200.17