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Math Help - Compound Monthly Interest question

  1. #1
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    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!
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  2. #2
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    Re: Compound Monthly Interest question

    Quote Originally Posted by Macmade View Post
    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.
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    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.
    Last edited by CaptainBlack; September 26th 2011 at 05:39 AM. Reason: removed TLA for expletive
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  4. #4
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    Re: Compound Monthly Interest question

    Quote Originally Posted by Macmade View Post
    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
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    Re: Compound Monthly Interest question

    oh yeah true. i often forget that yu cant cancel out if multiplication is present. thanks anywayz
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    Re: Compound Monthly Interest question

    Quote Originally Posted by Macmade View Post
    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"?
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    Re: Compound Monthly Interest question

    ^because its homework and students are expected to do it? b) requires the subtraction of term 1 and term 2. I also tried to solve a) by dividing the answer by 60 months. Do you understand?
    Last edited by Ackbeet; September 26th 2011 at 06:28 AM. Reason: Eliminated objectionable adjective.
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  8. #8
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    Re: Compound Monthly Interest question

    I will not do your homework.

    Perhaps someone else will, but I doubt it.
    Last edited by Ackbeet; September 26th 2011 at 06:29 AM. Reason: First part of first sentence obsolete.
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