Charles borrows $6000 for a new car.Compound intrest is charged on the loan at at a rate of 2% per month.Charles has to pay off the loan with 24 equal monthly payments.Calculate the value of each monthly payment.
2007-03-23 03:47:17 · 2 answers · asked by maximus i 1 in Science & Mathematics ➔ Mathematics
Sum of present values of all those payments should be equal to 6000.
let the installment be x
then
x/(1.02) + x/(1.02^2) + ........ + x/(1.02 ^24) = 6000
this is a geometric series with r = 1/1.02
on solving the equation becomes
x [ 1 - (1/1.02)^24] = 6000 * 0.02 = 120
x = 317.2266
2007-03-23 03:59:56 · answer #1 · answered by Nishit V 3 · 0⤊ 0⤋
2% of 6000: 6000*2/100= $120/month for interest
Interest Charles has to pay in 24 months: 120*24= $2880/24 months
Total loan Charles has to pay off in 24 months: 6000+2880= $8880
Value of each monthly payment to pay off the loan: 8880/24= $370
2007-03-23 03:51:23 · answer #2 · answered by Candy 2 · 0⤊ 1⤋