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A sum of $20000 is borrowed at 12% p.a. interest. If the money is paid back at regular monthly intervals over 4 years, find the amount of each payment.
Solution by Margaret Groove in MIF:
4 x 12 = 48 months
12%/12 = 1% monthly
This part i don't like: 12%/12 = 1%, i don't know if this is standard practise in the hsc but this is not accurate if you just divide by 12, i know the margin of error is small but the other method is not much longer and you yield a much more accurate result.
eg 12^root (1.12) = 1.009488.. = 0.95% monthly
Am i wrong in assuming the interest is compounding, is both method accepted or is my method not accepted?
Solution by Margaret Groove in MIF:
4 x 12 = 48 months
12%/12 = 1% monthly
This part i don't like: 12%/12 = 1%, i don't know if this is standard practise in the hsc but this is not accurate if you just divide by 12, i know the margin of error is small but the other method is not much longer and you yield a much more accurate result.
eg 12^root (1.12) = 1.009488.. = 0.95% monthly
Am i wrong in assuming the interest is compounding, is both method accepted or is my method not accepted?
