Question

You've just bought a new flat-screen TV for

$2,800

and the store you bought it from offers to let you finance the entire purchase at an annual rate of

12

percent compounded monthly. If you take the financing and make monthly payments of

$90,

how long will it take to pay off the loan? How much will you pay in interest over the life of the loan?

Answer #1

Present Value Of An Annuity | ||||

= C*[1-(1+i)^-n]/i] | ||||

Where, | ||||

C= Cash Flow per period =$90 | ||||

i = interest rate per period =12%/12 =1% | ||||

n=number of period | ||||

2800= $90[ 1-(1+0.01)^-n /0.01] | ||||

2800= $90[ 1-(1.01)^-n /0.01] | ||||

2800/90=[ 1-(1.01)^-n /0.01] | ||||

31.11111=[ 1-(1.01)^-n /0.01] | ||||

n =37.45 | ||||

Number of months = 34.45 | ||||

In years =3.12 years | ||||

Total payments = $90*35 | ||||

=$3150 | ||||

Interst amount =$3150-2800 | ||||

=$350 | ||||

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