This question... is it poorly written? (1 Viewer)

[MrBrightside]

I'm not sure if this question is worded incorrectly. It never mentions how often the interest is charged. Like per. annum or per month. I tried this question with per month because it says "paid off in equal monthly instalments"

But I ended up getting $24 150 per monthly repayment which is incorrect.

Note: This question is posted in the marathon, but no one is answering so I assumed people have not seen it.

 

[michaeljennings]

I'm not sure if this question is worded incorrectly. It never mentions how often the interest is charged. Like per. annum or per month. I tried this question with per month because it says "paid off in equal monthly instalments"

But I ended up getting $24 150 per monthly repayment which is incorrect.

Note: This question is posted in the marathon, but no one is answering so I assumed people have not seen it.

yeah definately worded incorrectly and at first i assumed it was per month because of the equal monthly repayments thing but if that didnt work then it must be per annum

 

[Drongoski]

You've a good point - ought to have clearly specified: "interest compounded monthly" or "compounded annually" . Conventionally though loans repaid monthly tend to be compounded monthly. (Bankers used to refer to these as 'monthly rest').

 

[MrBrightside]

did anyone get a different answer to me?

 

[funnytomato]

I'm not sure if this question is worded incorrectly. It never mentions how often the interest is charged. Like per. annum or per month. I tried this question with per month because it says "paid off in equal monthly instalments"

But I ended up getting $24 150 per monthly repayment which is incorrect.

Note: This question is posted in the marathon, but no one is answering so I assumed people have not seen it.

total payments over 20 years, 24150*240=5 796 000 for a 140 000 loan ?!

i assumed it's compounded monthly, and i got 1843.5

 

[funnytomato]

btw, this guy took away my only chance of having infinite wealth!!

http://en.wikipedia.org/wiki/Jacob_Bernoulli

 

[MrBrightside]

total payments over 20 years, 24150*240=5 796 000 for a 140 000 loan ?!

i assumed it's compounded monthly, and i got 1843.5

hey, you got it right! ...$1843.51

shit what did I do wrong? I was doing it at 12:15 am this morning maybe that's why.

For the GP: did you get a = 1, r = 1.0125, n = 239 ?

I tried it again, but still off a bit, got $1867.80 :/

 

[Drongoski]

n=20 x 12 = 240

 

[MrBrightside]

n=20 x 12 = 240

yeah My equation incorporates the 240, but not in the sum formula because it says the first instalment is to be made one month after the time of purchase.

I got

M( 1(1.0125^239 - 1) / (1.0125 - 1) ) = 140 000(1.0125)^240

 

[Drongoski]

Mr Brightside - pleez replace 239 with 240 and see wut you get?

 

[MrBrightside]

$1843.51

But I still don't see the logic behind it? Why does it say he didn't pay until after the first month.

 

[Drongoski]

You still have 240 terms in the geometric sum!

 

[funnytomato]

$1843.51

But I still don't see the logic behind it? Why does it say he didn't pay until after the first month.

what do u mean ?
if he pays at the start of the 1st month when there's no interest generated, why would he take a $140000 loan , instead of say $138000?

 

[funnytomato]

You still have 240 terms in the geometric sum!

+1

 

[MrBrightside]

You still have 240 terms in the geometric sum!

whaaat My GP goes up to 1.0125^238

 

[funnytomato]

whaaat My GP goes up to 1.0125^238

1.0125^239 is for the one deposited at the end of the 1st month of the loan, i.e. 239 months ago
1.0125^238 - 2nd month, 238 months ago
...
so 1.0125 is the one deposited 1 month ago
and 1 (1.0125^0) is just the you payment you make now, which is the final payment



so in total you have 240 repayments

 

[MrBrightside]

1.0125^239 is for the one deposited at the end of the 1st month of the loan, i.e. 239 months ago
1.0125^238 - 2nd month, 238 months ago
...
so 1.0125 is the one deposited 1 month ago
and 1 (1.0125^0) is just the you payment you make now, which is the final payment



so in total you have 240 repayments

hmm odd I do mine the other way around. the 1.0125 being the first monthly interest charged,

and the 1.0125^238 being the last deposited.

So let me get this right you include the final term on the RHS in the GP sum formula to make n = 240. This includes the final payment?

 

[Drongoski]

MrBrightside

Why don't you ask your teacher - he'll be able to clarify it without this to-ing & fro-ing on bos.

 

[MrBrightside]

MrBrightside

Why don't you ask your teacher - he'll be able to clarify it withoust this to-ing & fro-ing on bos.

I will.