Tammy wants to buy a car that costs $10,000 and wishes to know the amount of the monthly payments,which will be made at the end of the month,with interest of 12% on the unpaid balance.She should use a table for the:
A)Future value of $1.
B)Present value of $1.
C)Future value of an annuity of $1.
D)Present value of an annuity of $1.

Question

Quizplus · Accepted Answer

Tammy wants to know the amount of monthly payments that will be made, which is an annuity. She is also concerned about the interest on the unpaid balance, and therefore, she needs to use the present value of an annuity of $1 to calculate her monthly payments. This choice takes into account the time value of money and the interest rate. Therefore, the best choice in this case is D.

Tammy Wants to Buy a Car That Costs $10,000 and Wishes