Question

Ruby Rose will be in graduate school for the next three years. She borrowed some money from the bank for her graduate education, which the bank has accepted to be paid after Ruby graduates from school in two years.

The bank has accepted to the following payment plan: from the beginning of Year 4 (37th month) to end of year 5 (60th month), pay $600 in month 37 and increase payment by 4% every month thereafter.

How much money should Ruby Rose put aside each month (equal amount) for the first 36 months (during graduate school) such that she can pay the loan back after graduation? The bank charges an APR of 18%, compounded monthly.

Question 4 Part B: Provide values for the below listed variables

r = ?

A1 = ?

m = ?

k = ?

i_period = ?

Answer 1

The first payment will be made at the end of 37th month and it will be equal to $ 600 it will grow at a rate of 4% till the 60th payment.

Interest rate, r = 18% compounded monthly

m = compounding frequency = 12

K = 1 year

i (Per period) = 18/12 = 1.5% per month

The present value of monthly payment at the end of 36th month will be

Assume the monthly deposit she makes is A1. Therefore the amount she will be required to deposit will be

The factors are not clear to me, I have answered the question using all the factors and even verified it using excel getting the same value. Please share if having any difficulty will try to resolve your issue as soon as possible. Please help me, it mean a lot to me. Thank you.