Financial mathematics simple question .. (1 Viewer)

[Casmira]

6. Jordan puts a 10% deposit down on a $1200 washing machine. He then borrows the balance at a flat rate of 8% p.a. and pays it back in equal monthly instalments over 2 years

a) How much will jordan pay back altogether

I did

10/100 * 1200 = 120

1200 - 120 = 1080

Then I did 0.08 / 24 and got 0.003 (aprox)

therefor, 1080 * 0.003 * 24

and I get $77.76 as the interest per month / monthly instalment

Why the hell does the book do
1200 + 1080 * 0.08 * 2
= $1372

If the persons paying it back monthy, doesnt that mean the interest rate has to be split into 24 parts, and n = number of periods times by 24?

Im sure i was taught this, when i look back in the book my teachertells us sometimes to do a whole chapter or an umber of questions, but he didnt include this question, but this practise paper he compiled after copy/paste of other questions in is in it

I know what they did and he did thoroughly but it seems to puzzle me

 

[santaslayer]

The 77.76 is just the amount of interest he will pay from the balance. Don't you have to add the balance in it as well to get the amount he will pay back "altogether"?

 

[PC]

6. Jordan puts a 10% deposit down on a $1200 washing machine. He then borrows the balance at a flat rate of 8% p.a. and pays it back in equal monthly instalments over 2 years. How much will Jordan pay back altogether?

Deposit = 10% of $1200
= 0.10 x 1200
= $120

Balance owing after deposit is paid
= 1200 - 120
= $1080

Interest = Prn
= 1080 x 0.08 x 2
= $172.80

Total to repay = Balance + Interest
= 1080 + 172.80
= $1252.80

Monthly Instalment = 1252.80 ÷ 24
= $52.20

So ... Total that Jordan pays altogether
= Deposit + Payments
= 120 + (24 x 52.20)
= $1372.80

Hope that helps!

The thing to try to imagine in this question is to put yourself in Jordan's position. The only time you will actually physically pull money out of your pocket to pay anyone is when you pay the deposit, and make a payment, so that's all that's counted in the last step.

 

[Casmira]

man you guys have got totally different strategies as to mine, I see what you did to help but, shit yeh thanks