Hello. I have this below question, lecturer says "incorrect' as i used annuity formula, not the compound interest formula (even though the loan for the annuity is compounded, dont see why i cant use what i have?)
Have a test in two days, so need to get this paper worked out a.s.a.p, so i can study.
This is my workings.
A sum of $60,000 is being borrowed at an interest rate of 6% per annum, compounded monthly, with payments made monthly.
How much will need to be repaid each month if the life of the loan is:
5 years
N = 12 x 5 = 60
I = 0.06 / 12 = 0.005
Pay = PV / ((1+i)n-1 / i
60 000 / ((1+0.005)60 -1 / 0.005)
60 000 /( 0.3488501 / 0.005)
60 000 / 69.77003
859.96809
Pay = $859.97 needs to be deposited each month
ii. 8 years
I = 0.06 / 12 = 0.005
N = 12 x 8 = 96
Pay = PV / ((1+i)n – 1) / i
60 000 / ((1+0.005)96- 1)/ 0.005
60 000 / (0.6141427 / 0.005)
60 000 / 122.82854
Pay = $122.83
I know the compound interest formula is
A = P(1+r/n)^nt
And i did that sum with my workings. But the answer i get is the total amount earned (as can be seen below). I need to find my monthly repayments
A= P(1+r/n)^nt
= 60,000 (1+(0,06/12)^60
= 60,000 (1.348850)
= $80,931.00915
So the $80,931.00915, should i divide that by 60? (total nt) = $1,348.85
I do not know. How do i rearrange the compound interest formula to get the answer im needing?
Thank you for your help.
Have a test in two days, so need to get this paper worked out a.s.a.p, so i can study.
This is my workings.
A sum of $60,000 is being borrowed at an interest rate of 6% per annum, compounded monthly, with payments made monthly.
How much will need to be repaid each month if the life of the loan is:
5 years
N = 12 x 5 = 60
I = 0.06 / 12 = 0.005
Pay = PV / ((1+i)n-1 / i
60 000 / ((1+0.005)60 -1 / 0.005)
60 000 /( 0.3488501 / 0.005)
60 000 / 69.77003
859.96809
Pay = $859.97 needs to be deposited each month
ii. 8 years
I = 0.06 / 12 = 0.005
N = 12 x 8 = 96
Pay = PV / ((1+i)n – 1) / i
60 000 / ((1+0.005)96- 1)/ 0.005
60 000 / (0.6141427 / 0.005)
60 000 / 122.82854
Pay = $122.83
I know the compound interest formula is
A = P(1+r/n)^nt
And i did that sum with my workings. But the answer i get is the total amount earned (as can be seen below). I need to find my monthly repayments
A= P(1+r/n)^nt
= 60,000 (1+(0,06/12)^60
= 60,000 (1.348850)
= $80,931.00915
So the $80,931.00915, should i divide that by 60? (total nt) = $1,348.85
I do not know. How do i rearrange the compound interest formula to get the answer im needing?
Thank you for your help.