Asked by Jasmine Mendoza on May 29, 2024
Verified
Fast Eddie's Used Cars will sell you a 2000 Ford Taurus for $3,000 with no money down. You agree to make weekly payments for two years, beginning one week after you buy the car. The stated rate on the loan is 26%. How much is each payment?
A) $32.96
B) $37.06
C) $38.19
D) $45.90
E) $69.65
No Money Down
A financing or purchase arrangement in which the buyer is not required to make any upfront payment at the time of purchase.
Weekly Payments
Regular payments made on a weekly basis, often used in terms of loan repayment schedules or employment salaries.
Stated Rate
The annual interest rate declared on a financial instrument, such as a bond, without accounting for compounding within the year.
- Evaluate and differentiate between different savings and payment methods to make educated financial decisions.
Verified Answer
TA
Theodora AmorkorJun 02, 2024
Final Answer :
B
Explanation :
To find the weekly payment for a loan, you can use the formula for the payment on an annuity: PMT=PV×i1−(1+i)−nPMT = \frac{PV \times i}{1 - (1 + i)^{-n}}PMT=1−(1+i)−nPV×i , where PMT is the payment, PV is the present value (or loan amount), i is the interest rate per period, and n is the total number of payments.Given:- Loan amount (PV) = $3,000- Annual interest rate = 26%- Payments are weekly, so there are 52 weeks/year. Thus, the weekly interest rate i=26%52=0.5%i = \frac{26\%}{52} = 0.5\%i=5226%=0.5% - The loan term is 2 years, so the total number of payments n=2×52=104n = 2 \times 52 = 104n=2×52=104 weeks.Plugging these values into the formula: PMT=3000×0.0051−(1+0.005)−104PMT = \frac{3000 \times 0.005}{1 - (1 + 0.005)^{-104}}PMT=1−(1+0.005)−1043000×0.005PMT \approx $37.06 Therefore, the weekly payment is approximately $37.06.
Learning Objectives
- Evaluate and differentiate between different savings and payment methods to make educated financial decisions.