Determining Ordinary Annuity Payments Determine the amount of the periodic payme

Question

Determining Ordinary Annuity Payments Determine the amount of the periodic payments needed to pay off the following purchases. Payments are made at the end of the period. (Click here to access the PV table to use with this problem.) Round to the nearest whole dollar amount.

1. Purchase of a flat-screen TV for $2,360. Monthly payments are to be made for one year with interest at 24% per annum, compounded monthly. $______ per month.?

2.Purchase of a waterskiing boat for $26,065. Quarterly payments are to be made for four years with interest at 8% per annum, compounded quarterly. $______ per quarter. ?

3.Purchase of a condominium for $63,500. Semiannual payments are to be made for 10 years with interest at 10% per annum, compounded semiannually. $_______ semi-annually?

Explanation / Answer

a)

EMI = ( P × r × (1+r)n ) / ((1+r)n 1) =(2360*(24/1200)*(1+.02)1 /(1+.02)1 -1 = $223.16 per month

EMI = Equated Monthly Installment   

P = Loan Amount - Down payment    

r = Annual Interest rate / 1200    

n = Term (Period or no.of year or months for loan repayment.)

b) Payment Every Quarter $1,919.69

c) Payment Every 6 Months $5,095.40

Beginning Balance Interest Principal Ending Balance 1 $26,065.00 $521.30 $1,398.39 $24,666.61 2 $24,666.61 $493.33 $1,426.36 $23,240.25 3 $23,240.25 $464.81 $1,454.89 $21,785.37 4 $21,785.37 $435.71 $1,483.98 $20,301.38 Year #1 End 5 $20,301.38 $406.03 $1,513.66 $18,787.72 6 $18,787.72 $375.75 $1,543.94 $17,243.78 7 $17,243.78 $344.88 $1,574.81 $15,668.97 8 $15,668.97 $313.38 $1,606.31 $14,062.66 Year #2 End 9 $14,062.66 $281.25 $1,638.44 $12,424.22 10 $12,424.22 $248.48 $1,671.21 $10,753.01 11 $10,753.01 $215.06 $1,704.63 $9,048.38 12 $9,048.38 $180.97 $1,738.72 $7,309.66 Year #3 End 13 $7,309.66 $146.19 $1,773.50 $5,536.16 14 $5,536.16 $110.72 $1,808.97 $3,727.20 15 $3,727.20 $74.54 $1,845.15 $1,882.05 16 $1,882.05 $37.64 $1,882.05 $0.00 Year #4 End

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