13.) A car dealership is advertising a 2.8% annual interest rate and no payments for 60 months (5 years) if you buy a car in January. Reading the fine print shows that the interest on a car loan from this dealership is compounded monthly with a balloon payment at the end of the 60 months. (no monthly payments- pay at the end of 60 months) a. What is the effective rate of 2.8% annual interest compounded weekly? b. If you borrow $25,000 for your car, how much will the balloon payment, A, be at the end of 60 months? i. Estimate the amount assuming continuously compounded interest formula. ii. Find a better estimate of the value of the balloon payment using the compounded interest formula
13.) A car dealership is advertising a 2.8% annual interest rate and no payments for 60 months (5 years) if you buy a car in January. Reading the fine print shows that the interest on a car loan from this dealership is compounded monthly with a balloon payment at the end of the 60 months. (no monthly payments- pay at the end of 60 months) a. What is the effective rate of 2.8% annual
i. Estimate the amount assuming continuously compounded interest formula.
ii. Find a better estimate of the value of the balloon payment using the compounded interest formula.
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