You want to buy a new sports car from roy's cars for $51,800. the contract is in the form of a 48-month annuity due at an apr of7.8 percent, compounded monthly. what would be your monthly payment?

The present value of an annuity is given by



where: PV is the current value of the annuity, P is the periodic payment, r is the apr, t is the number of compounding in one year and n is the number of years.

Thus, given that PV = $51,800; r = 7.8% = 0.078; t = 12; n = 4.



Therefore, the monthly payment is $1,259.73

Monthly payment is calculated as follows: This would only be solved using a BA II plus calculator, no educational institution would as for a manual evaultion, key strokes are as follows: N = 48 I/Y = 7.8/12 = .65 PV = -51800 FV = 0 CPT PMT Calculator display will read : $1,259.73. Monthly payment will be $1,259.73 monthly for 48 months.