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FM calculation questions, please help

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  • FM calculation questions, please help

    Q1:
    Paul borrows $4000 at 18% simple interest, He is to repay the loan by paying $1000 at the end of 3 months and making two equal payments at the end fo 6 months and 9 months. Find the size of the eqal payments, using as the focal date the end of 6 months
    ans: $1693.97
    Q2:
    Jackie borrows $1000 at 11% interest, she is going to repay the loan in 3 equal payments at 3 months, 6 months, 9months, whats the size of the payment?
    ans:$353.53
    Last edited by daveliu; August 22 2005, 01:20 PM.

  • #2
    Second question is obviously incorrect because at 0% interest, you'd have to make 3 payments of $333 to pay back 1000. It doesn't make sense to make smaller payments when you increase the interest rate.
    Whether you are the lion or the gazelle, when the sun comes up, you better be running.

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    • #3
      On Q1, the value immediately after first payment is 4000(1+1/4*.18)-1000=3180

      Accumulated value of this at end of ninth month is
      3180(1+1/2*.18) = X(1+1/4*.18)+X
      where X is the payment. Solve for X.
      Whether you are the lion or the gazelle, when the sun comes up, you better be running.

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      • #4
        Never Mind, thank you for helping, I got it now.
        someone asked me these 2 questions yesterday which I was only finished CH.1, and I just finished CH.2 today and I found these 2 questions are actually in CH2.5
        so I know how to do both of them now, they are easy. THank you very much anyway.

        besides, focal date in my text book is called "comparision date"

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