If a loan of P dollars, at an interest rate of r percent

Hello,

I am not able to solve this question. Can you please assist?

If a loan of P dollars, at an interest rate of r percent per year compounded monthly, is payable in n monthly installments of m dollars each, then m is determined by the formula:

m = (rP/1200)/( 1 - (1 + r/1200)^-n)

John and Sue took out loans whose monthly installments were determined by using the formula above. Both loans had the same interest rate and the same number of monthly installments. John's monthly installment was what percent of Sue's monthly installment?

(1) The amount of Sue's loan was 4 times the amount of John's loan.

(2) Sue's monthly installment was 4 times John's monthly installment.

OA: D


The compound interest formula that I use from MGMAT guide is

CI = P (1 + r/n)^(nt)

where, r = annual rate of interest, n = number of times a year and t = number of years.


I was not sure if for this question, I first needed to simplify the formula given in the question since monthly installment is n.

Thanks a lot for your help,
Sri