Mike wants to buy a snowmobile. His parents decide to lend him $9 000 at 10%/a, compounded monthly, if he agrees to repay the amount by making equal monthly (at the end of the month) payments for five years.

Question

d. Write the series that represents the present value of the annuity.

e. Find the monthly payment using the formula.
f. Find the monthly payment using the T1 - 83 plus calculator. In your answer, include the values you entered for each parameter in TVM solver.

Answer 1

d)
i = .10/12 = .008333..
PV = 9000
= x(1.008333)^-1 + x(.008333)^-2 + ... + x(1.008333)^-60

e)
9000 = x[1 - 1.008333^-60]/.083333
9000 = x(47.0654126)
x = 191.22

f) that's all yours, I don't have one of those.

Answer 2

Thanks a million!