Question:
You borrow $15,000 to buy a car. The loan is to be paid off in monthly installments over five years at 12
percent interest annually. The first payment is due one month from today. If the present value of an
ordinary annuity of $1 for 5 years @12% with monthly compounding is $44.955, what is the amount of
each monthly payment?
a. $334
b. $456
c. $546
d. $680
Answer:
a. PVA = PMT x PVA factor
$15,000 = PMT x 44.955
PMT = $334
You borrow $15,000 to buy a car. The loan is to be paid off in monthly installments over five years at 12
percent interest annually. The first payment is due one month from today. If the present value of an
ordinary annuity of $1 for 5 years @12% with monthly compounding is $44.955, what is the amount of
each monthly payment?
a. $334
b. $456
c. $546
d. $680
Answer:
a. PVA = PMT x PVA factor
$15,000 = PMT x 44.955
PMT = $334
