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by MI3 » Sun Jun 19, 2011 7:00 am
Jim needs $1,000 to buy a new flat-screen TV. Since he has only $7, he borrows the remanining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C - 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?
A. $357.67
B. $375.85
C. $387.40
D. $399.30
E. $433.33

Unfortunately, I don't know the answer to this question.
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by Frankenstein » Sun Jun 19, 2011 7:34 am
Hi,
I guess you meant to say, C = (1+r)^N and it is not the monthly payment but annual payment
L = 1000-7 = 993, r = 0.1, C =(1+0.1)^3 = 1.331
So, P = 993*1.331*0.1/0.331 = 399.3$

Hence, D
Cheers!

Things are not what they appear to be... nor are they otherwise
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by ankur_1900 » Mon Sep 09, 2013 4:12 am
Frankenstein wrote:Hi,
I guess you meant to say, C = (1+r)^N and it is not the monthly payment but annual payment
L = 1000-7 = 993, r = 0.1, C =(1+0.1)^3 = 1.331
So, P = 993*1.331*0.1/0.331 = 399.3$

Hence, D
How do you simplify the complicated equation you get by inserting numbers?

P = 993*1.331*0.1/0.331 = 399.3$
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by vipulgoyal » Mon Sep 09, 2013 10:26 pm
How do you simplify the complicated equation you get by inserting numbers?

P = 993*1.331*0.1/0.331 = 399.3$

multiply and divide num and deno by 1000

993*1.331*.1*1000/331
= 3*1.331*.1*1000
=3.993*.1*1000
=399.3
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