# Loans and Interest

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• Mar 8th 2011, 07:59 AM
ksiemsen24
Loans and Interest
Jim takes out a loan for $5,000 compounded monthly at 5%annual interest and his friend Mark takes out a loan the same day for$6,000 compounded monthly at 3% annual interest:

1) When will the amount of payments made by Jim be equal to Mark's payments?

2) What is this amount?
• Mar 8th 2011, 08:43 AM
e^(i*pi)
Use the classic compound interesting formula

$P_t = P_0 \left(1+ \dfrac{r}{n}\right)^{nt}$

Where:

• $P_t$ is the amount at time t
• $P_0$ is the initial amount (t=0)
• $r$ annualised interest rate
• $n$ number of compounds per year
• $t$ number of years

Can you fit the information you've been given into that formula? If you use it once for Jim and once for Mark then you can set the two equations equal to each other and solve for t
• Mar 8th 2011, 09:39 AM
Wilmer
Quote:

Originally Posted by ksiemsen24
Jim takes out a loan for $5,000 compounded monthly at 5%annual interest and his friend Mark takes out a loan the same day for$6,000 compounded monthly at 3% annual interest:
1) When will the amount of payments made by Jim be equal to Mark's payments?
2) What is this amount?

Please CLARIFY.
Do you mean: when will both loan balances be equal?
Why do you say "payments" if these loans are not repaid by regular loan payments?
Do you mean monthly payments are made (interest compounds monthly)?
• Mar 8th 2011, 06:58 PM
ksiemsen24
Loans and Interest
Harry takes out a loan at $5,000 compounded monthly at 5% annual interest and his friend Carrie took out a loan the same day for$6,000 compounded monthly at 3% annual interest:

1) When will the amount of payments that Harry makes on his loan equal the amount of payments that Carrie makes on her loan?

2) What is the amount that that will be equal?

(I posted this question differently before, and was asked to clarify, but this is how the question was proposed to me verbatim. Please help.)
• Mar 8th 2011, 08:23 PM
Wilmer
Well, if you can't answer my questions, then there's nothing I can do.

Your problem is a bit like:
Jack has 50 apples and John has 60 apples.
If they both eat apples for a while, with John eating a little
faster than Jack, when will they have an equal number of apples?

IF "somehow" the intent is to find out when the loan balances will be
equal IF no payments are made, then:
5000(1 + .05/12)^n = 6000(1 + .03/12)^n
Solve for n.