# finance

• Nov 3rd 2006, 11:42 AM
gracy
finance
One retailer charges \$2,400 for an exercise bicycle. An health club buys ten of these bikes. The club makes a down payment of \$2,000 and agrees to amortize the balance with monthly payments at 12% interest on the unpaid balance for 5 years.
a) Calculate the monthly payment.
b) Prepare an amortization schedule, similar to the one in the Lecture notes, showing the first six payments.
• Dec 9th 2006, 04:11 PM
sh01by
Hey there...
It should be quite simple...

10 bicycles is \$2.400 x 10 = \$24.000...

The club pays \$2.000 at first, so the rest of the 'loan' is \$22.000, which leaves us to find the monthly payment - it's easily done - if you have Excel - it's using the PMT formula - I'm assuming the interest rate is per year, so - I approximate the monthly interest rate to 12%/12 = 1% - the PMT formula would look like... =PMT(0,01;(5*12);-22000), which equals (just about) \$500...

It should also be easy to show an amortization schedule...

(Beginning balance) (payment) (interest) (pmt - interest) (End balance)
Period #1
Beginning balance: 22.000 payment: \$500 interest: (1% of 22.000) (pmt - interest): \$220 End balance: 21.780
Period #2
Beginning balance: 21.780 payment: \$500 interest: (1% of 21.780) (pmt - interest): ? End balance: ?

etc., etc.

Simon DK - I hope it helps...