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30 January, 16:54

1. The car dealer is offering a promotion on a new that the buyer pays zero interest over 72 months. The monthly payment is $350. The market interest rate for a 6-year car loan is 3.5%. What is the selling price of this car?

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  1. 30 January, 17:01
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    selling price of this car is $22700

    Explanation:

    given data

    zero interest = 72 months

    monthly payment = $350

    market interest rate = 3.5% per year = 0.2917 % per month

    time = 6 year = 72 months

    solution

    we get here present value of annuity that is

    present value annuity = (0.2917 % per month, 72 months)

    present value annuity = 64.8568

    so here selling price of car is

    selling price = monthly payment * present value annuity ... 1

    selling price = $350 * 64.8568

    selling price = $22700

    so selling price of this car is $22700
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