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    sagnik2422 Posts: 77, Reputation: 1
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    Mar 22, 2014, 10:38 AM
    Annuity Calculation Question Accounting
    Hi I need some help with steps on this :

    On April 1, 2013, John purchased supplies from Acme Company for $1200. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. John will make 18 equal monthly payments beginning October 1, 2013. The annual interest rate implicit in this agreement is 24%.

    Reqd: Calculate monthly payment necessary for John to pay expenses:
    The book showed the PV calc from the pv tables as :

    PV = ? X .90573 (pv of $1 : n = 5, I = 2% , table 2 --> Pv of $1 table) = 1,200
    and solving , pv = 1,325
    and then went on to show PVA = annuity x 14.99703 = 1,325, and solving resulted in 1,325/ 14.99703 = $
    MY CONFUSION : Where does the n = 5 come from? Why is this being used as opposed to 6?

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