In August 2008, General Motors was offering the choice of a 2.9% loan for 36 months, or $2000 cash back on the purchase of a $30,000 Pontiac Grand Prix.
(a) If you take the 2.9% loan offer, how much will your monthly payment be?
$_________
(b) If you take the $2000 cash-back offer and can borrow money from your local credit union at 8.1% interest compounded monthly for three years, how much will your monthly payment be?
$_________
Pt = (Po*r*t)/(1-(1+r)^-t).
r = (2.9%/12) / 100% = 0.00242 = Monthly % rate expressed as a decimal.
t = 36 Months.
Pt=(30,000*0.00242*36)/(1-(1.00242)^-36
= $31,362.03.
a. Monthly = 31,362.03 / 36 = $871.17.
b. Monthly = $941.48.
Use same procedure as part a.