Suppose Angie would like to purchase a new car today for $45,000. She will pay $5,000 as down payment towards this purchase and finance the balance over 5 years at an annual interest rate of 7.5%. The first payment will be made in exactly one month from the purchase date. Payments are made every month over the next 5 years.

1. What is the loan amount?
2. What is the monthly interest rate?
3. How many monthly payments will be made?
4. Calculate the monthly payment required to fully pay off the loan in 5 years using both the formula and the function method.
5. Show that the present value of all the monthly payments is equal to the loan amount. Use the timeline method for this.

Solve using Excel