Use the formula for the present value of an annuity

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Reference no: EM131025563

Ford’s current incentives include 4.9% financing for 60 months (monthly payments for 5 years) or $1000 cash back for a Mustang. Let’s assume a student wants to buy a Mustang convertible that costs $25,000, and she has no down payment other than the cash back from Ford. If she chooses the $1000 cash back, she can borrow from the Credit Union at 6.9% for 60 months. What will the student’s monthly payment be under each option? Hint: You need to use the formula for the present value of an annuity, modify it for non-annual periods, and then use it to calculate the payments (PMT).

Reference no: EM131025563

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