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Math Help - compound interest problem

  1. #1
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    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
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  2. #2
    Bar0n janvdl's Avatar
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    Quote Originally Posted by imppy725 View Post
    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.


     1800 = (P - 500)(1 + \frac{18}{1200} )^ \frac{3}{2}

    There now it looks better. Solve for P

    I get P = 21623
    Last edited by janvdl; May 23rd 2007 at 12:34 PM.
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  3. #3
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    Quote Originally Posted by janvdl View Post
    I think 500 is discount.


     A = \frac{(P - 500)(1 + \frac{18}{1200} )^ \frac{3}{2}}{12} + 1800

    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?
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  4. #4
    Bar0n janvdl's Avatar
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    Quote Originally Posted by imppy725 View Post
    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
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  5. #5
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    Quote Originally Posted by janvdl View Post
    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
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  6. #6
    Bar0n janvdl's Avatar
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    Quote Originally Posted by imppy725 View Post
    will you walk me through it please?
     1800 = (P - 500)(1 + \frac{18}{1200} )^ \frac{3}{2}

    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 =  \frac{3}{2} years.

    But interest is compounded monthly so its 18% x  \frac{1}{12}

    Therefore:
    (P - 500) = 1760
    P = 2260

    Hope it helps.
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