Answer:
$119.57
Step-by-step explanation:
We have to find present value of annuity to find the monthly payment.
Given,
Present value, PV = $4,000
Down payment = $4,000 × 10% = $400
Remaining present value = $(4,000 - 400) = $3,600
Interest, i = 12% = 0.12
As we need monthly payment, the interest rate will be monthly = 0.12/12 = 0.01.
Number of period, n = 3
monthly payment, m = 12
We know,
Present value of annuity = PMT × [tex]\frac{1 - (1 + \frac{i}{m})^{-n*m} }{\frac{i}{m} }[/tex]
$3,600 = PMT × [tex]\frac{1 - (1 + \frac{0.12}{12})^{-3*12} }{\frac{0.12}{12} }[/tex]
or, $3,600 = PMT × 30.1075
or, PMT = $119.57
Monthly payment should be $119.57
