HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $3,900 down payment and signed a note that calls for 36 payments of $1,041.00 at the end of each month. The stated rate of interest in the note is 5%. As an incentive for entering into the contract, Trans has agreed to forgive the first two payments under the lease. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)

What was the purchase price of the used truck excluding the incentive given?

Purchase price of the used truck

$ 38,633.49

Calculate the present value of the 34 payments of $1,041.00 that will be made by HQ for payments 3 to 36 inclusive. You will need to perform two steps. 1. Calculate the present value of the 34 payments as of the end of the second month following the purchase of the used truck.

Present value

$ 32,937.41

2. Take the result from the first calculation and calculate the present value as of the date of purchase.

Present value

$ 32,664.69

What amount should HQ use to record the purchase of the truck? 36564.69

Question: What amount of interest should be accrued at the end of the first month following the purchase?

TABLE PV.1 Present Value of 1 ( periods 29% 27% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 0.98039 0.97561 0.96117 0.95181 0.94232 0.92860 0.92385 0.90595 0.90583 0.88385 0.97087 0.96156 0.94260 0.92456 0.91514 0.88900 0.88849 0.85480 0.86261 0.82193 0.95238 0.90703 0.86384 0.82270 0.78353 0.94340 0.89000 0.83962 0.79209 0.74726 0.93458 0.92593 0.87344 0.85734 0.81630 0.79383 0.76290 0.73503 0.71299 0.68058 0.91743 0.84168 0.77218 0.70843 0.64993 0.90909 0.82645 0.75132 0.68301 0.62092 0.90090 0.81162 0.73119 0.65873 0.59345 0.89286 0.79719 0.71178 0.63552 0.56743 0.86957 0.75614 0.65752 0.57175 0.49718 6 12 0.88797 0.86230 0.83748 0.79031 0.87056 0.84127 0.81309 0.75992 0.853490.82075 0.78941 0.73069 0.83676 0.80073 0.76642 0.70259 0.82035 0.78120 0.74409 0.67556 0.80426 0.76214 0.72242 0.64958 0.78849 0.74356 0.70138 0.62460 0.773030.72542 0.68095 0.60057 0.75788 0.70773 0.66112 0.57748 0.74301 0.69047 0.64186 0.55526 0.72845 0.67362 0.62317 0.53391 0.71416 0.65720 0.60502 0.51337 0.70016 0.64117 0.58739 0.49363 0.68643 0.62553 0.57029 0.47464 0.67297 0.61027 0.55368 0.45639 0.74622 0.71068 0.67684 0.64461 0.61391 0.58468 0.55684 0.53032 0.50507 0.48102 0.45811 0.43630 0.41552 0.39573 0.37689 0.70496 0.66634 0.63017 0.59627 0.56447 0.53464 0.50663 0.43233 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.37594 0.62741 0.58201 0.54027 0.50187 0.46651 0.43393 0.40388 0.32690 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.36061 0.28426 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.24719 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.21494 0.49697 0.44401 0.39711 0.35554 0.31863 0.28584 0.25668 0.18691 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.16253 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.14133 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.12289 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.16312 0.10687 0.37136 0.31657 0.27027 0.23107 0.19785 0.16963 0.14564 0.09293 0.35034 0.29586 0.25025 0.21199 0.17986 0.15282 0.13004 0.08081 0.33051 0.27651 0.23171 0.19449 0.16351 0.13768 0.11611 0.07027 0.31180 0.25842 0.21455 0.17843 0.14864 0.12403 0.10367 0.06110 17 (1) Periods 2% 0.98039 1.94156 2.88388 3.80773 4.71346 24% 0.97561 1.92742 2.85602 3.76197 4.64583 3% 0.97087 1.91347 2.82861 3.71710 4.57971 4% 0.96154 1.88609 2.77509 3.62990 4.45182 PV = 1 - 5% 6% 0.95238 0.94340 1.85941 1.83339 2.72325 2.67301 3.54595 3.46511 4.32948 4.21236 7% 0.93458 1.80802 2.62432 3.38721 4.10020 8% 0.92593 1.78326 2.57710 3.31213 3.99271 9% 0.91743 1.75911 2.53130 3.23972 3.88965 10% 11% 0.90909 0.90090 1.73554 1.71252 2.48685 2.44371 3.16986 3.10245 3.79079 3.69590 12% 0.89286 1.69005 2.40183 3.03735 3.60478 15% 0.86957 1.62571 2.28323 2.85498 3.35216 4.23054 4.11141 3.78448 6 7 5.075694.91732 5.78637 5.58238 4.76654 5.38929 4.62288 5.20637 4.48592 5.03295 5.60143 5.50813 5.41719 5.24214 6.47199 6.349396.23028 6,00205 7.32548 7.17014 7.019696.73274 .162247.97087 7.78611 7.43533 4.35526 4.86842 5.33493 5.75902 6.46321 7.10782 6.20979 6.80169 5.97130 6.51523 5.74664 6.24689 5.53482 5.99525 4.71220 5.14612 5.53705 4.56376 4.96764 5.32825 4.16042 4.48732 4.77158 9 8 8.98259 8.75206 8.53020 8.11090 7.721737.36009 7.02358 6.71008 6.41766 6.14457 5.88923 5.650225.01877 9.78685 10.57534 9.514219.25262 10.25776 9.95400 8.76048 9.38507 8.30641 8.86325 7.88687 8.38384 7.49867 7.94269 7.13896 7.53608 6.80519 7.16073 6.49506 6.81369 6.20652 6.49236 5.93770 6.19437 5.23371 5.42062 12 13 11.34837 10.98319 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.48690 7.10336 6.74987 6.42355 5.58315 12.10625 12.84926 11.69091 12.38138 11.29607 11.93794 10.56312 11.11839 9.89864 10.37966 9.294988.74547 8.24424 9.71225 9.10791 8.55948 7.78615 8.06069 7.36669 7.60608 6.981876.62817 7.19087 6.81086 5.72448 5.84737 7.37916 6.97399 5.95424 16 17 13.57771 14.29187 13.05500 13.71220 14.99203 15.67846 16.35143 14.35336 14.97889 15.58916 12.56110 13.16612 13.75351 14.32380 14.87747 11.65230 12.16567 12.65930 13.13394 13.59033 10.83777 11.27407 11.68959 12.08532 12.46221 10.10590 10.47726 10.82760 11.15812 11.46992 9.44665 8.85137 9.76322 9.12164 10.059099.37189 10.33560 9.60360 10.59401 9.81815 8.31256 8.54363 8.75563 8.95012 9.12856 7.82371 8.02155 8.20141 8.36492 8.51356 7.54879 7.11963 6.04716 7.70162 7.24967 6.12797 7.839297.36578 6.19823 7.96333 7.46944 6.25933 20 TABLE PV.1 Present Value of 1 ( periods 29% 27% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 0.98039 0.97561 0.96117 0.95181 0.94232 0.92860 0.92385 0.90595 0.90583 0.88385 0.97087 0.96156 0.94260 0.92456 0.91514 0.88900 0.88849 0.85480 0.86261 0.82193 0.95238 0.90703 0.86384 0.82270 0.78353 0.94340 0.89000 0.83962 0.79209 0.74726 0.93458 0.92593 0.87344 0.85734 0.81630 0.79383 0.76290 0.73503 0.71299 0.68058 0.91743 0.84168 0.77218 0.70843 0.64993 0.90909 0.82645 0.75132 0.68301 0.62092 0.90090 0.81162 0.73119 0.65873 0.59345 0.89286 0.79719 0.71178 0.63552 0.56743 0.86957 0.75614 0.65752 0.57175 0.49718 6 12 0.88797 0.86230 0.83748 0.79031 0.87056 0.84127 0.81309 0.75992 0.853490.82075 0.78941 0.73069 0.83676 0.80073 0.76642 0.70259 0.82035 0.78120 0.74409 0.67556 0.80426 0.76214 0.72242 0.64958 0.78849 0.74356 0.70138 0.62460 0.773030.72542 0.68095 0.60057 0.75788 0.70773 0.66112 0.57748 0.74301 0.69047 0.64186 0.55526 0.72845 0.67362 0.62317 0.53391 0.71416 0.65720 0.60502 0.51337 0.70016 0.64117 0.58739 0.49363 0.68643 0.62553 0.57029 0.47464 0.67297 0.61027 0.55368 0.45639 0.74622 0.71068 0.67684 0.64461 0.61391 0.58468 0.55684 0.53032 0.50507 0.48102 0.45811 0.43630 0.41552 0.39573 0.37689 0.70496 0.66634 0.63017 0.59627 0.56447 0.53464 0.50663 0.43233 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.37594 0.62741 0.58201 0.54027 0.50187 0.46651 0.43393 0.40388 0.32690 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.36061 0.28426 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.24719 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.21494 0.49697 0.44401 0.39711 0.35554 0.31863 0.28584 0.25668 0.18691 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.16253 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.14133 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.12289 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.16312 0.10687 0.37136 0.31657 0.27027 0.23107 0.19785 0.16963 0.14564 0.09293 0.35034 0.29586 0.25025 0.21199 0.17986 0.15282 0.13004 0.08081 0.33051 0.27651 0.23171 0.19449 0.16351 0.13768 0.11611 0.07027 0.31180 0.25842 0.21455 0.17843 0.14864 0.12403 0.10367 0.06110 17 (1) Periods 2% 0.98039 1.94156 2.88388 3.80773 4.71346 24% 0.97561 1.92742 2.85602 3.76197 4.64583 3% 0.97087 1.91347 2.82861 3.71710 4.57971 4% 0.96154 1.88609 2.77509 3.62990 4.45182 PV = 1 - 5% 6% 0.95238 0.94340 1.85941 1.83339 2.72325 2.67301 3.54595 3.46511 4.32948 4.21236 7% 0.93458 1.80802 2.62432 3.38721 4.10020 8% 0.92593 1.78326 2.57710 3.31213 3.99271 9% 0.91743 1.75911 2.53130 3.23972 3.88965 10% 11% 0.90909 0.90090 1.73554 1.71252 2.48685 2.44371 3.16986 3.10245 3.79079 3.69590 12% 0.89286 1.69005 2.40183 3.03735 3.60478 15% 0.86957 1.62571 2.28323 2.85498 3.35216 4.23054 4.11141 3.78448 6 7 5.075694.91732 5.78637 5.58238 4.76654 5.38929 4.62288 5.20637 4.48592 5.03295 5.60143 5.50813 5.41719 5.24214 6.47199 6.349396.23028 6,00205 7.32548 7.17014 7.019696.73274 .162247.97087 7.78611 7.43533 4.35526 4.86842 5.33493 5.75902 6.46321 7.10782 6.20979 6.80169 5.97130 6.51523 5.74664 6.24689 5.53482 5.99525 4.71220 5.14612 5.53705 4.56376 4.96764 5.32825 4.16042 4.48732 4.77158 9 8 8.98259 8.75206 8.53020 8.11090 7.721737.36009 7.02358 6.71008 6.41766 6.14457 5.88923 5.650225.01877 9.78685 10.57534 9.514219.25262 10.25776 9.95400 8.76048 9.38507 8.30641 8.86325 7.88687 8.38384 7.49867 7.94269 7.13896 7.53608 6.80519 7.16073 6.49506 6.81369 6.20652 6.49236 5.93770 6.19437 5.23371 5.42062 12 13 11.34837 10.98319 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.48690 7.10336 6.74987 6.42355 5.58315 12.10625 12.84926 11.69091 12.38138 11.29607 11.93794 10.56312 11.11839 9.89864 10.37966 9.294988.74547 8.24424 9.71225 9.10791 8.55948 7.78615 8.06069 7.36669 7.60608 6.981876.62817 7.19087 6.81086 5.72448 5.84737 7.37916 6.97399 5.95424 16 17 13.57771 14.29187 13.05500 13.71220 14.99203 15.67846 16.35143 14.35336 14.97889 15.58916 12.56110 13.16612 13.75351 14.32380 14.87747 11.65230 12.16567 12.65930 13.13394 13.59033 10.83777 11.27407 11.68959 12.08532 12.46221 10.10590 10.47726 10.82760 11.15812 11.46992 9.44665 8.85137 9.76322 9.12164 10.059099.37189 10.33560 9.60360 10.59401 9.81815 8.31256 8.54363 8.75563 8.95012 9.12856 7.82371 8.02155 8.20141 8.36492 8.51356 7.54879 7.11963 6.04716 7.70162 7.24967 6.12797 7.839297.36578 6.19823 7.96333 7.46944 6.25933 20