Suppose you purchase a new car today for $25,000. You pay $2,000 as down payment towards...

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Finance

Suppose you purchase a new car today for $25,000. You pay $2,000as down payment towards this purchase, and finance the balance over5 years at an annual interest rate of 5%, the first payment to bemade in one month. Payments are made every month over the next 5years. Calculate the monthly payment using both formula andfunction method. (Hint: need to multiply time by 12 to find thenumber of months and need to divide interest rate by 12 to findmonthly interest rate. You can use the present value of annuityformula for this.) b. Show that the present value of all monthlypayments is equal to the loan amount using the timeline method.

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Suppose you purchase a new car today for $25,000. You pay $2,000as down payment towards this purchase, and finance the balance over5 years at an annual interest rate of 5%, the first payment to bemade in one month. Payments are made every month over the next 5years. Calculate the monthly payment using both formula andfunction method. (Hint: need to multiply time by 12 to find thenumber of months and need to divide interest rate by 12 to findmonthly interest rate. You can use the present value of annuityformula for this.) b. Show that the present value of all monthlypayments is equal to the loan amount using the timeline method.