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Math Help - finance

  1. #1
    Junior Member
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    Oct 2006
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    71

    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.
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  2. #2
    Junior Member
    Joined
    Nov 2006
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    Copenhagen
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    Lightbulb 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...
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