Question

If you buy a computer directly from the manufacturer for $3,132 and agree to repay it in 60 equals inatallments at 1.62% interest per month on the unpaid balance, how much are you monthly payments? How much total interest will be paid?

(round to two decimal places)

Answer 1

Part A:

Particulars	Amount
Loan Amount	$               3,132.00
Int Rate per month	1.6200%
No. of Months	60

EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per month & n is no. of months
= $ 3132 / PVAF (0.0162 , 60)
= $ 3132 / 38.1923
= $ 82.01

PVAF = SUm [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

How to calculate PVAF using Excel:
=PV(Rate,NPER,-1)
Rate = Disc Rate
NPER = No.of periods

Part B:

Total Int Paid:
Total Int paid = [ Instalment * No. of Instalments ] - Loan Amount
= [ $ 82.01 * 60 ] - $ 3132
= [ $ 4920.36 ] - $ 3132
= $ 1788.36

Pls comment, if any further assistance is required.