Answer to Question #178868 in Financial Math for David

Question

Bill makes car payments of $273/month for the next 3 years.

His car loan has an interest rate of 2.6%, discounted monthly.

What was the initial price of the car?

Answer 1

Present value of this annuity ,the formula will be

$$Pv=P({(1-{(1+r)}^{-n})\over r})$$

P-periodic payments

r-rate per period

n-number of periods

And because it's months payments, r will be

$r\over 12$

n will be $n×12$

$\therefore$

$$273({(1-(1+{0.2166\over 100})^{-36})\over {{0.2166\over100}}})$$ $$=9444.07$$