1. ## geometrical progression

im not sure where to post this
so
a bank loan of 500 pounds is arranged to be repaid in two years by equal monthly instalments. Interest, CALCULATED MONTHLY, is charged at 11% per annum on the remaining debt. Calculate the monthly repayment if the first repayment is to be made one month after the loan is granted.

I've been working for almost two hours on this problem, ending up with the equation (500-m)(1211/1200)^24 - (1200m/11) ((1211/1200)^24 -1)
m being the equal monthly repayment
from there i ended up with m= 21.something, apparently not far from the truth but nevertheless incorrect; can somebody show me how they would do this?

2. P = Ai / [1 - 1/(1 + i)^n]

A = Amount borrowed (500)
i = interest per month (.11/12)
n = number of payments (24)

3. thanks but i can't use this thing, i need to use geometric progression methods

4. please i really need help here, ive posted this cos ive tried everything already

5. ok so i got 23.29 when my textbook says 23.31; is this a negligible difference or a symptom of a BIG problem? this is my work
ahem
S1= (500-m monthly payment) x (1211/1200)
S2= (S1 -m) x (1211/1200)
= (500-m)(1211/1200)^2 - (1211/1200)m
and so on
so i take as general equation for finding m
0= (500-m)(1211/1200)^24 - m[(1211/1200)^23 -1]/[(1211/1200)-1]

from there i get 23.29 pounds
is there any fault in my working?

6. Hello furor celtica
Originally Posted by furor celtica
ok so i got 23.29 when my textbook says 23.31; is this a negligible difference or a symptom of a BIG problem? this is my work
ahem
S1= (500-m monthly payment) x (1211/1200)
S2= (S1 -m) x (1211/1200)
= (500-m)(1211/1200)^2 - (1211/1200)m
and so on
so i take as general equation for finding m
0= (500-m)(1211/1200)^24 - m[(1211/1200)^23 -1]/[(1211/1200)-1]

from there i get 23.29 pounds
is there any fault in my working?
I make it £23.30 to the nearest penny, so I reckon you're about OK. I don't know that I really understand your working, though. Here's how I did it:

At the end of month 1, the amount owing = $\displaystyle 500\times\frac{1211}{1200}-m$

At the end of month 2, when we simplify the expression, the amount owing = $\displaystyle 500\times\Big(\frac{1211}{1200}\Big)^2-\Big(m+m\times\frac{1211}{1200}\Big)$

At the end of month 3, the amount owing = $\displaystyle 500\times\Big(\frac{1211}{1200}\Big)^3-\Big(m+m\times\frac{1211}{1200}+m\times\Big(\frac{ 1211}{1200}\Big)^2\Big)$

... and so on.

The expression in the bracket is a GP, first term $\displaystyle m$, common ratio $\displaystyle \frac{1211}{1200}$, sum to 24 terms = $\displaystyle m\frac{\Big(\dfrac{1211}{1200}\Big)^{24}-1}{\dfrac{1211}{1200}-1}$

If the sum owing at the end of month 24 is zero, then:

$\displaystyle 500\times\Big(\frac{1211}{1200}\Big)^{24} - m\frac{\Big(\dfrac{1211}{1200}\Big)^{24}-1}{\dfrac{1211}{1200}-1}=0$

...which you then solve, giving £23.30 to the nearest penny.

7. are you sure its not to 23 terms?
what do you not understand in my working?

Plus he IS using the equivalent of 23 terms:
the divisor (1211/1200 - 1) can be moved to the numerator as (1211/1200 - 1)^(-1)

9. Hello furor celtica
Originally Posted by furor celtica
are you sure its not to 23 terms?
what do you not understand in my working?

First, since you're a regular contributor to Math Help Forum, learn to use LaTeX - it makes things so much easier to follow!

Second, explain your working more clearly; say what you mean by S1, S2, ... for instance.

As to your actual method, if S1 means the amount still owing after the first monthly payment has been made, this is not correct. You have taken off the payment first, and then worked out the interest payable on the balance. This would be correct if the first payment were made at the beginning of the month (i.e. as soon as the loan is taken out), but it's not. It's made at the end of the month. Therefore interest is charged on the whole £500 for the first month. And so on in each subsequent month.

This is why your repayments are a penny or two less than they should be.

And, yes, I am sure that the GP has 24 terms, not 23.