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When Cecilia's car needs a new transmission, she's stuck with a bill for $1840. The dealership offers her an 18-month loan at 14.5% interest to be repaid in 18equal installments. Find the monthly payment. Round your intermediate steps to the nearest cent.The monthly payment is?

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Answer

Explanation

The data given are:

The present value, Pv = $1840

Rate, r = 14.5% = 14.5/100 = 0.145

The time is 18 months, and in years, t = 18/12 = 1.5 years

Since the Present value is known, then the future value can be calculated by the formula:

[tex]\begin{gathered} Fv=Pv(1+r)^n \\ Fv=1840(1+0.145)^{1.5} \\ Fv=1840\times1.225 \\ Fv=2254 \end{gathered}[/tex]

So to know the monthly installment payment, we divide Future value by 18, that is,

[tex]\frac{2254}{18}=125.22[/tex]

Therefore the monthly payment is $125.22

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