Chapter Annuities Future value and present value of an ordinary simple annuity Future value and present value of an ordinary general annuity Joshua secured a 3-year car lease at 5

Finance Mar 19, 2021

Chapter Annuities

Future value and present value of an ordinary simple annuity

Future value and present value of an ordinary general annuity

Joshua secured a 3-year car lease at 5.90% compounded annually that required her to make payments of $887.57 at the beginning of each month. Calculate the cost of the car if she made a downpayment of $3,750.

Expert Solution

First we calculate Present value of Annuity using PV Function in Excel:

=-pv(rate,nper,pmt,fv,type)

Here,

PV = Present Value of Annuity = ?

Rate = 5.90%/12

Nper = 3 Years*12 = 36

PMT = $887.57

FV = 0

Type = 1

Substituting the values in formula:

=-pv(5.90%/12,36,887.57,0,1)

PV or Present Value of Annuity = $29,362.49

Cost of Car = Present Value of Annuity + Down Payment

= $29,362.49 + $3,750

Cost of Car = $33,112.49

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote