# finite math

using the formula for present value of ordinary annuity or the amortization formula to solve this problem.

PV=13000
I= .015
PMT=550
n?

1. 👍 0
2. 👎 0
3. 👁 206
1. Is I the annual interest or monthly interest?
It will be assumed monthly interest.

Present Value, P = 13000
Payment (monthly) A = 550
interest (monthly) i = 0.015

The amortization formula would equate future value with the sum of all the payments, all increased at rate of interest i.

Future value = sum of all payments

Let R=1+i
PRn = A + AR + AR² + AR³ + ... + ARn-1
=A(Rn+1)/(R-1) (by factoring)
Hence
(Rn-1)/((R-1)*Rn) = P/A

To solve for the period n, there is no explicit formula to calculate.

The easiest way is to calculate the payment for a given period n.

If the payment matches 550, then the estimated n is correct.

For example,

The equation can be converted into a formula for the monthly payment, A

A=P(R-1)R^n/(R^n-1)
For
P=13000
R=1.015
we make a first estimate from
13000/550=23.6
We know n>23.6, so try 30
A=13000(.015)1.015^30/(1.015^30-1)
=541.3 < 550
So we try 29 payments
A=556.1
We then know that the period n lies between 29 and 30, and for all practical purposes, we would put it at 30.

1. 👍 0
2. 👎 0
2. The right-hand side of the amortization formula should read:

A(Rn-1)/(R-1) (by factoring)

1. 👍 0
2. 👎 0

## Similar Questions

1. ### finite math

Using the formula for PV (present value) of an oridinary annuity or the amortization formula to solve this problem. PV=13000 I=.03% PMT=500 n=? I have done it over and over and can't it correct

asked by carol on June 20, 2014
2. ### Calculus

A \$99,000 mortgage for 30 years at 9% APR requires monthly payments of \$796.58. Suppose you decided to make monthly payments of \$1,100. When would the mortgage be completely paid? I am using a present value of annuity eguation but

asked by Abbey on December 18, 2006
3. ### Annuities

Can someone tell me if this is ordinary annuity of future or ordinary values sinking funds present value or what is it. The question is You are earning an average of 46500 and will retire in 10 years. If you put 20% of your gross

asked by Scott Ingraham on April 12, 2008
4. ### math

Classify the finacial problem. Assume a 7% interest rate compounded annually. Find the value of a \$ 1,000 certificate in 4 years. a) sinking fund, b) ordinary annuity, c) future value, d) present value e) amortization.

asked by Andrew on March 2, 2013
5. ### math

Classify the finacial problem. Assume a 7% interest rate compounded annually. Find the value of a \$ 1,000 certificate in 4 years. a) sinking fund, b) ordinary annuity, c) future value, d) present value e) amortization

asked by Andrew on March 3, 2013
1. ### Finite math

Consider the following annuity scheme: regular payments of \$200 are made every two months at the end of the month (in other words, there are six equally spaced payments over the year) into an account with a nominal rate of 6%

asked by Johnny on November 10, 2016
2. ### finite math

A \$1.2 million state lottery pays \$5,000 at the beginning of each month for 20 years. How much money must the state actually have in hand to set up the payments for this prize if money is worth 7.7%, compounded monthly? (a) Decide

asked by help plzzz on May 1, 2011
3. ### Math

The amount to be financed on a new car is \$9,500. The terms are 11% for 4 years. What is the monthly payment? (a) State the type. future value ordinary annuity present value amortization sinking fund (b) Answer the question.

asked by Ronald on June 14, 2013
4. ### algebra

Suppose a retiree wants to buy an ordinary annuity that pays her \$2,000 per month for 20 years. If the annuity earns interest at 3.5% interest compounded monthly, what is the present value of this annuity?

asked by beech on October 11, 2011
5. ### algebra

how would i work out the following problems solve each formula in terms of the given variable 1. 5d-2g=9 ;g The formula A=2h(l+w) gives the lateral area a of a rectangular solids with length l, width,w and height h. 2. solve this

asked by jessica on September 22, 2008

More Similar Questions