Finding the Present Value Compounded Monthly

  • Thread starter Thread starter runicle
  • Start date Start date
  • Tags Tags
    Value
AI Thread Summary
Carmen is purchasing a jeep for $38,400, with 0% financing over 48 months, and needs to determine how much to invest at 6% annual interest, compounded monthly, to cover her monthly payments after the first one. The present value formula is applied to calculate the required investment amount, resulting in a calculated present value of approximately $1,635,084. The monthly payment amount needs to be calculated by dividing the total cost, including GST and PST, by 48 months. It's crucial to note that Carmen will invest after making her first payment, affecting the number of periods for which interest will accrue. The discussion highlights the need to ensure that the monthly interest earned matches the required monthly payment.
runicle
Messages
75
Reaction score
0
At the end of the season, the jeep Carmen is buying is offered with 0% financing for 48 months. The negoctiated cost is $38 400, plus GST and PST. The total cost is divided into equal payments for 48 months, with the first payment on the date of purchase. Carmen will make the first payment, then invest an amount to provide the money each month for the remaining payments, which start in a month. How much must Carmen invest, at 6% per annun, compounded monthly, to have the amount each month for the payment?
Let present value be PV
PV=R x (1 + i)^-n / i

This is what i did.
PV = 38400 x (1 - (1 + 0.06/12)^-48)/ 0.06/12
PV = 7 680 000 x 0.21290588
PV = 1 635 084

Is there any complication / error?
 
Physics news on Phys.org
so the amount of INTEREST per month should equal the amount that needs to be paid per month.

what is the amount per month? $38400 + GST + PST divded by teh number of months.

calculate the amount u would need to invest if the interest it paid per month is equal to what u just got above. Also Carmen is investing the money AFTER the first payment so for how many periods will the interest be paying?
 
I tried to combine those 2 formulas but it didn't work. I tried using another case where there are 2 red balls and 2 blue balls only so when combining the formula I got ##\frac{(4-1)!}{2!2!}=\frac{3}{2}## which does not make sense. Is there any formula to calculate cyclic permutation of identical objects or I have to do it by listing all the possibilities? Thanks
Since ##px^9+q## is the factor, then ##x^9=\frac{-q}{p}## will be one of the roots. Let ##f(x)=27x^{18}+bx^9+70##, then: $$27\left(\frac{-q}{p}\right)^2+b\left(\frac{-q}{p}\right)+70=0$$ $$b=27 \frac{q}{p}+70 \frac{p}{q}$$ $$b=\frac{27q^2+70p^2}{pq}$$ From this expression, it looks like there is no greatest value of ##b## because increasing the value of ##p## and ##q## will also increase the value of ##b##. How to find the greatest value of ##b##? Thanks
Back
Top