Payment and Total Interest
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Payment and Total Interest

[From: ] [author: ] [Date: 11-06-13] [Hit: ]
03/12 = 0.A = Fr/{[(1+r)^n - 1]*(1+r)} = A = 6500*0.0025/{[(1.0025)^36 - 1]*1.= $172.Total payment = 172.......
A homeowner is planning to have a concrete driveway poured in 3 years. She receives a quote of $6500 from a local company. The homeowner has a savings account that pays 3% annual interest, compounded monthly.

a) How much money per month does she need to deposit in her account in order to be able to pay in cash for the driveaway n 3 years.

B) how much of the money she uses to pay for the driveway will come
i) money deposited into the account
ii) interest?

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This is a problem concerning monthly annuity.
A = Fr/{[(1+r)^n - 1]*(1+r)}
Here, F = 6500, r = 0.03/12 = 0.0025 and n = 36
The installment is
A = Fr/{[(1+r)^n - 1]*(1+r)} = A = 6500*0.0025/{[(1.0025)^36 - 1]*1.0025}
= $172.35
Total payment = 172.35*36 = 6204.60
Interest = 6500 - 6204.60 = $295.40

Hope this helps.

-
Caramba
Hombre
1
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