Problema Solution
Lupé made a down payment of $6000 toward the purchase of a new car. To pay the balance of the purchase price, she has secured a loan from her bank at the rate of 7%/year compounded monthly. Under the terms of her finance agreement she is required to make payments of $430/month for 48 months. What is the cash price of the car? (Round your answer to the nearest cent.)
Answer provided by our tutors
The formula to calculate the loan amount is:
Loan Amount = (C/(i/12)) * (1-(1/(1+(i/12))^n)), where
C = payment
i = interest rate
n = loan term
According to your problem:
C = $430
i = 7%
n = 48 months
Loan amount = (430/(.07/12)) * (1-(1/(1+(.07/12))^48))
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Loan amount = $17,956.88
Lupe made a down payment of $6,000 and borrowed $17,956.88 from the bank to pay for the car.
$17,956.88 + $6,000 = $23,956.88
The cash price of the car is $23,956.88.