To determine the balance of the loan after 4 months using a recurrence relation, we need to first calculate the monthly interest rate.
Monthly interest rate = 8.45% / 12 = 0.7042% or 0.007042 as a decimal
Let Bn represent the balance of the loan after n months. The recurrence relation can be written as:
B(n+1) = Bn(1 + 0.007042) - 850
Now we can calculate the balance of the loan after 4 months by using the recurrence relation:
B1 = 75000
B2 = B1(1 + 0.007042) - 850
B3 = B2(1 + 0.007042) - 850
B4 = B3(1 + 0.007042) - 850
By substituting the values of B1, B2, and B3 into the formula, you can calculate the balance of the loan after 4 months, which would be the value of B4.
how would i do this question:
a loan of $75000 is charged interest at a rate of 8.45 p.a. compunding monthly. The monthly repayments for this loan are $850. Use a recurrence relation to determine the balance of this loan after 4 months.
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