On January 1, Frank Jensen bought a used car for $7200 and agreed to pay for it
ID: 1239453 • Letter: O
Question
On January 1, Frank Jensen bought a used car for $7200 and agreed to pay for it as follows: 1/3 down payment; the balance to be paid in 36 equal monthly payments; the first payment due February 1; an annual interest rate of 9%, compounded monthly.Note: Use a interest rate of 0.75% per month (which corresponds to an annual nominal interest rate of 9% as given in the problem).
a) What is the amount of Frank's monthly payment? (I got $76.34 using A =P[i(i+1)^N]/(i+1)^N-1)
b). During the summer, Frank made enough money to pay off the entire balance due on the car as of October 1. How much did Frank owe on October 1?
JUST ANSWER PART B!!
Explanation / Answer
a. let monthly payment be x $7200 = 1/3*7200 + x/(1+.75%) + x/(1+.75%)^2 + x/(1+.75%)^3....................x/(1+.75%)^36 x= $152.64 b. let the payment made on oct 1 be a Number of payments made befor Oct1 = 8 $7200 = 1/3*7200 + $228.95/(1+.75%) + $228.95/(1+.75%)^2 + ....$228.95/(1+.75%)^8 +a/(1+.75%)^9 a= $3870 payment made on oct 1 = $3870