Value of Payments

Upon graduation from college, Susana Lopez signed an agreement to buy a used car. Her annual payments, which are due at the end of each year for two years, are $1,480. The car dealer used a 12% rate compounded annually to determine the amount of the payments.

Use the appropriate present or future value table:

FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1

Required:

Use the full factor when calculating your results. Round your calculations and final answers to the nearest cent.

1. What should Susana consider the value of the car to be?

$

2. If she had wanted to make quarterly payments, what would her payments have been based on the value of the car as determined in part (1)?

$

How much less interest would she have paid if she had been making quarterly payments instead of annual payments?