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Zanhook
Sep 26, 2006, 12:46 PM
Calculating the number of payments:

Your're prepared to make monthly payments of 125, beginning at the end of this month, into an account that pays 10% interest compnounded monthly. How many payments will you have made when your account balance reaches 20,000. I know you solve for t but I get stuck on what to do when I get to here...
16= 1-1/(1.1)`t

Calculating Annuity Present Values:

You want to borrow 45,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of 950, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60 month APR loan?

EAR verus APR:

You have just purchased a new warehouse. To finance the purchase, you're arranged for a 30 year mortgage loan for 80% of the 1600000 purchase price. The monthly payment on this loan will be 10000. What is the APR, and the EAR?

Calculating Annuities Due:

You want to buy a new sports car from Muscle Motors for 56000. The contract is in the form of a 48 month annuity due at an 8.15% APR. What will your monthly payment be?

If you are able to show how you solved the problem that would be great, thanks for any help :)

CaptainForest
Sep 26, 2006, 02:21 PM
Calculating the number of payments:

Your're prepared to make monthly payments of 125, beginning at the end of this month, into an account that pays 10% intrest compnounded monthly. How many payments will you have made when your account balance reaches 20,000. I know you solve for t but I get stuck on what to do when I get to here...
16= 1-1/(1.1)`t


FV = A x [ (1+r)^n / r ] – 1

20,000 = 125 x [1.1^n/0.1 ] – 1
20,001 = 125 x [1.1^n/0.1 ]
160.008 = 1.1^n / 0.1
16.0008 = 1.1^n
n = log 16.0008 / log 1.1
n = 29.09

Therefore, it will take about 29-30 payments periods to reach $20,000

Zanhook
Sep 26, 2006, 03:25 PM
FV = A x [ (1+r)^n / r ] – 1

20,000 = 125 x [1.1^n/0.1 ] – 1
20,001 = 125 x [1.1^n/0.1 ]
160.008 = 1.1^n / 0.1
16.0008 = 1.1^n
n = log 16.0008 / log 1.1
n = 29.09

Therefore, it will take about 29-30 payments periods to reach $20,000

Thank you very much for your help... were you able to look at the other problems I had posted with that one?