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March 31, 2015

Homework Help: math: precalc

Posted by Ajax on Monday, December 21, 2009 at 3:38pm.

You are going to buy a $18,000 car. The dealer offers you $2000 cash back of nothing down and 0% financing for 60 months. If you take the financing, starting in one month you will pay one-sixtieth of $18,000 each month for 60 months. In some sense that is not really "0% financing" because you could have bought the care for, effectively, $16,000 and you will be making $18,000 in payments. Use the present value formula to determine the actual finance rate. [Hint: Do not expect to solve it algebraically.]

Present value Formula: A={R[1-(1+i)^-n]} / i

where A is the present value, R is the amount of each payment, i is the rate per time period, and n is the time period.

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