# Compound Monthly Interest question

• Sep 25th 2011, 04:18 PM
Compound Monthly Interest question
This is a question from a text book. plz help and solve it.

The Huang family purshased a motor home by borrowing $30,000 at 9%/a compounded monthly. The Huang will make payments at the end of each month. They have two choices for the term: 5 years and 8 years a) Determine the monthly payments for each term. b) How much money would they save by choosing the shorter term. I tried to do find the total amount after 5 years which is$46,970.43 and 8 year is $61,467.64. As I subtracted the 5 year total from 30,000 and divide by 5x12 months, I got$282.84 for a) but the book says its $622.75 so apparantly im wrong. The book also says for 8 year term it is 439.51 and b) is$4827.96.

Help asap!!?? any answer is welcome!
• Sep 25th 2011, 04:42 PM
skeeter
Re: Compound Monthly Interest question
Quote:

This is a question from a text book. plz help and solve it.

The Huang family purshased a motor home by borrowing $30,000 at 9%/a compounded monthly. The Huang will make payments at the end of each month. They have two choices for the term: 5 years and 8 years a) Determine the monthly payments for each term. b) How much money would they save by choosing the shorter term. I tried to do find the total amount after 5 years which is$46,970.43 and 8 year is $61,467.64. As I subtracted the 5 year total from 30,000 and divide by 5x12 months, I got$282.84 for a) but the book says its $622.75 so apparantly im wrong. The book also says for 8 year term it is 439.51 and b) is$4827.96.

Help asap!!?? any answer is welcome!

your text should have a formula for calculating payments ...

$P = A \cdot \frac{r(1+r)^n}{(1+r)^n - 1}$

$P$ = monthly payment

$A$ = amount financed

$r$ = monthly interest

$n$ = total number of monthly payments

... plug and chug on a calculator.
• Sep 25th 2011, 04:51 PM
Re: Compound Monthly Interest question
so to simplify that P=A*r/-1? i plug the values in the equation you gave me and it gave me an extravagant number. World Transit Facility, sorry the book is more like a question book with answers.
• Sep 25th 2011, 05:00 PM
skeeter
Re: Compound Monthly Interest question
Quote:

so to simplify that P=A*r/-1? i plug the values in the equation you gave me and it gave me an extravagant number. wtf. sorry the book is more like a question book with answers.

you cannot cancel the $(1 + r)^n$ in the formula ... review your basic algebra.

$A = 30000$

$r = \frac{.09}{12}$

for 5 years, $n = 60$
• Sep 25th 2011, 05:05 PM
Re: Compound Monthly Interest question
oh yeah true. i often forget that yu cant cancel out if multiplication is present. thanks anywayz
• Sep 25th 2011, 06:28 PM
Wilmer
Re: Compound Monthly Interest question
Quote:

I tried to do find the total amount after 5 years which is $46,970.43 and 8 year is$61,467.64.

Those are the FV's of \$30,000 after 5 and 8 years: has NOTHING to do with the problem.
IF as you say this is "a question from a text book", WHY do you need answer "asap"?
• Sep 25th 2011, 06:46 PM