Answer to Question #178864 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

calculating the initial price of the car

$Pv=PMT*\frac{1-(1+r)^{-n}}{r}$

where Pv is the present(initial value)

PMT is the amount of monthly payment

r is the rate of discount

n is the number of repayment periods.

we need to find the number of periods in months; 3*12=36 months

$Pv=273*\frac{1-(1+0.026)^{-36}}{0.026}$

=6332.41