FIN 419 P4–48 Monthly loan payments Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months).

FIN 419 Chapter 4 P4–48 Monthly loan payments Tim Smith is shopping for a used car. He has found

FIN 419: Finance for Decision making

FIN 419 C4 P4–48 Tim Smith is shopping for a used car. He has found one priced

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Chapter 4 P4–48 Monthly loan payments Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months).

a. Assuming that Tim accepts the dealer’s offer, what will his monthly (end-of month) payment amount be?

b. Use a financial calculator or Equation 4.15a (found in footnote 9) to help you figure out what Tim’s monthly payment would be if the dealer were willing to finance the balance of the car price at a 9% annual rate. page 176 footnote 9

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