Question

Jennifer bought a brand new treadmill on a credit plan at BeFit Exercise Equipment. BeFit will charge her 15% per year compounded monthly. If her monthly payments will be $150 for 4 years, how much was the original price of the treadmill?
a) $5,390.72
b) $5,389.72
c) $5,388.72
d) $5,392.72
e) $5,385.72

Answer 1

P = Po(1+r)^n.

P = 4 * 150 = $600.
r = 0.15/12mo. = 0.0125/mo.
n = 12Comp./yr. * 4yrs. = 48 Compounding periods.
Po = ?.

Answer 2

Correction: P = 150 * 48 = $7200.