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17 March, 15:00

Candy purchases a new guitar costing $5,500. She put down 15% and finance the rest for 3 years through the store. The store will charge her 10% per year compounded quarterly.

Identify the type of problem.

Present Value with compound interest

Future V alue of an Annuity

Present V alue of an Annuity

Amortization

Sinking Fund

What are her quarterly payments?

a. $469.67

b. $502.35

c. $455.75

d. $406.60

e. $488.80

+2
Answers (1)
  1. 17 March, 16:30
    0
    c. $455.75

    Explanation:

    The computation of the quarterly payments is shown below:

    = Balance amount : PVIFA factor for 2.5% at 12 years

    where,

    Balance amount is

    = $5,500 - $5,500 * 15%

    = $5,500 - $825

    = $4,675

    And the PVIFA factor for 2.5% at 12 years is 10.2578

    Refer to the PVIFA table

    So, the quarterly payments is

    = $4,675 : 10.2578

    = $455.75

    In the case of quarterly payments, the rate is one fourth and time period would be 4 times
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