Thread: 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.

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...