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17 March, 15:23

Suppose you want to buy a new computer system and the store is willing to sell it to allow you to make monthly payments. The entire computer system costs $3,500. The loan period is for 2 year and the interest rate is 16.9% with monthly compounding. What is your monthly payment? How much will this computer cost you?

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  1. 17 March, 15:29
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    Using a financial calculator, input the following;

    Present value; PV = - 3500

    Duration of investment; N = 2*12 = 24 months

    Monthly interest rate = 16.9% / 12 = 1.408%

    One time future cashflow; FV = 0

    then compute the recurring payment; CPT PMT = $172.87

    Therefore, your monthly payment would be $172.87 and the total cost would be 172.87 * 24 = $4,148.88
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