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June 12th, 2012, 02:07 PM   #1
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Annuities question

A car costing $15000 requires a down payment of $3000 and has interest 9% p.a. compounded monthly for five years. How would you solve this question?
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June 12th, 2012, 06:20 PM   #2
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Re: Annuities question

Quote:
Originally Posted by stomper123
A car costing $15000 requires a down payment of $3000 and has interest 9% p.a. compounded monthly for five years. How would you solve this question?
I see no question (except yours!) . Did you forget something?
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June 16th, 2012, 10:25 PM   #3
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Re: Annuities question

Since the payment is the only thing missing, I would assume that's the question.

You already seem to know it's an annuity. Then you determine if it's present value or future value. The cost of the car is now, so that's present value. PV annuity equation is:



where
i = interest per compounding period (i.e. rate divided by # of compounding periods in a year)
n = total number of compounding periods (i.e. # of period in a year x years)

You can solve for the payment with this. If it's not algebra based and you're using a financial calculator and Excel or something, you need to say so.

Don't forget you're not financing the down payment.
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