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Craig bought a new boat. He made a 19% down payment. He financed the rest through his bank for 3 years. His bank charged 5% per year compounded monthly and his monthly payments were $300. What was the original price of the boat?

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jepessoa

Answer:

$12,357

Explanation:

we can use the present value of an annuity formula to determine the 81% of the price of the boat:

present value = monthly payment x annuity factor

  • monthly payment = $300
  • PV annuity factor, 36 periods, 0.4167% = 33.3637

present value = $300 x 33.3637 = $10,009.11

this present value represents 81% of the purchase price, so the total purchase price = $10,009.11 / 81% = $12,356.93 ≈ $12,357

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