Thread: compound interest problem

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

Originally Posted by imppy725

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

I think 500 is discount.




There now it looks better. Solve for P

I get P = 21623

Originally Posted by janvdl

I think 500 is discount.




Something doesnt look right here. Why are both A and P unknown?

is ur formula the same as mines? if yes, can you plug in numbers u sing my variables, because im getting kind of confused. thanks, and can you tell me how I should be dealing with the discount?

Originally Posted by imppy725

is ur formula the same as mines? if yes, can you plug in numbers u sing my variables, because im getting kind of confused. thanks, and can you tell me how I should be dealing with the discount?

You'll see i've edited my post

Originally Posted by janvdl

You'll see i've edited my post

will you walk me through it please? because i sort of want it in my math language, you know...the stuff i've learnt

Originally Posted by imppy725

will you walk me through it please?

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.