Homework Help: math

Posted by MathHelp on Tuesday, October 4, 2011 at 10:57pm.

A person takes out a monthly installment loan of $2000 with an annual percentage rate of 13.0% if the person can afford no more than $70 per month, then which of the following terms are feasible? a) 8 months b ) 12 months c) 18 months d) 24 months e) 36 months

math - Steve, Wednesday, October 5, 2011 at 5:06am
Massaging the formula for the monthly payment

M = Pr/(1-(1+r)^-n) gives

n = log(M/(M-Pr)) / log(1+r)

With r = .13/12 = 0.010833333
M = 70
P = 2000

M/(M-Pr) = 70/(70 - 2000 * 0.01083333) = 1.448

log 1.448/log 1.010803333 = 34.3, so the 36 month term looks good.

You can also ballpark this by estimating:

13%/year is about 1%/month. 1% of 2000 is 20.
So, the payments start out with $20 interest, leaving $50 going to principal.

2000/50 = 40, which is bigger than 36, but later payments include less interest, so the term would be less than 40. 36 is the best choice.

Answer this Question

Related Questions

math - Cassandra is repaying an installment loan of $3,500 with 20 equal monthly...
Business Math - Cassandra is repaying an installment loan of $3,500 with 20 ...
SOMEBODY HELP ME WITH MATH!!!!!! - A person wishes to borrow $20,000 and has the...
Business Finance - Cassandra is repaying an installment loan of $3500 with 20 ...
math - Cassandra is repaying an installment loan of 3,500 with 20 equal payments...
eco - Suppose a person pays $80 of annual interest on a loan that has a 5 ...
Finance - Loan Payments - If you take out an $8,000 car loan that calls for 48 ...
Finance - Consider the following scenario: John buys a house for $150,000 and ...
Finance - Consider the following scenario: John buys a house for $150,000 and ...
Math (Word Problem) - Imagine that you have just taken out a loan for one year ...

For Further Reading

First Name:
School Subject:
Answer: