Use the information for the question(s)below.
Two years ago, you purchased a new car. You financed your car for 60 months (with payments made at the end of the month)with a loan at 6.1% APR. Your monthly payments are $617.16 and you have just made your 24th monthly payment on your car.
-The amount of your original loan is closest to:
A)$31 460
B)$33 000
C)$31 846
D)$33 300

Question

Quizplus · Accepted Answer

We can use the formula for the present value of an annuity to find the original loan amount. 
PV = C[(1-(1+r)^-n)/r]
Where:
C = monthly payment = $617.16
r = monthly interest rate = 6.1%/12 = 0.00508
n = total number of payments = 60 
Using this formula, we get: 
PV = $617.16[(1-(1+0.00508)^-60)/0.00508] 
PV = $31,845.62
So the original loan amount is closest to $31,846, which is choice C.

Use the Information for the Question(s)below