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 of 7.8 percent, compounded monthly. what would be your monthly payment? a) $1,251.60b) $1,109.29c) $1,245.70d) $1,152.98e) $1,084.32

option (A)  $1251.60

Explanation:

Data provided in the question;

Cost of the Roy's Cars = $51,800

Duration of the annuity = 48 months

Interest rate = 7.8%

Monthly interest rate, i = = 0.65% = 0.0065

Now,

Present value of annuity is given using the formula

Present value = PMT × × (1 + i)

on substituting the respective values, we get

$51,800 = PMT × × (1 + 0.0065)

or

$51,800 = PMT × [153.84 - 112.72 ] × (1.0065)

or

$51,800 = PMT × 41.387

or

PMT = $1251.60

Hence,

the monthly payment will be option (A)  $1251.60

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