A syntesizer is advertised at $500 down and $100 per month for 18 months. If interest is charged at 18% per annum compounded monthly, what is the cash proce of the synthesizer?
hi guys, i need to know what does $500 down mean and how to calculate it.
I know it has something to do with the Annuity formula:
A = R[(1+i)^n -1] / i
thanks in advance!
Michael
In the end you pay 100 for 18 months = 1800. That is A's value.
P is the original price but you got 500 discount. Therefore: (P - 500)
The interest is over 18 months = 1.5 years = years.
But interest is compounded monthly so its 18% x
Therefore:
(P - 500) = 1760
P = 2260
Hope it helps.