At the beginning of a month, a customer owes a credit card company $8480. In the middle of the month, the customer repays $A, where A < $8480, and at the end of the month the company adds interest at a rate of 6% of the outstanding debt. This process is repeated with the customer continuing to pay off the same amount, $A, each month. (a) Find the value of A for which the customer still owes $8480 at the start of each month. (b) If A = 1000, calculate the amount owing at the end of the eighth month. (c) Show that the value of A for which the whole amount owing is exactly paid off after the nth payment is given by 8480R-¹(R-1) R" - 1 (d) Find the value of A if the debt is to be paid off exactly after 2 years. A = where R=1.06
At the beginning of a month, a customer owes a credit card company $8480. In the middle of the month, the customer repays $A, where A < $8480, and at the end of the month the company adds interest at a rate of 6% of the outstanding debt. This process is repeated with the customer continuing to pay off the same amount, $A, each month. (a) Find the value of A for which the customer still owes $8480 at the start of each month. (b) If A = 1000, calculate the amount owing at the end of the eighth month. (c) Show that the value of A for which the whole amount owing is exactly paid off after the nth payment is given by 8480R-¹(R-1) R" - 1 (d) Find the value of A if the debt is to be paid off exactly after 2 years. A = where R=1.06
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:At the beginning of a month, a customer owes a credit card company $8480. In the
middle of the month, the customer repays $A, where A < $8480, and at the end of the
month the company adds interest at a rate of 6% of the outstanding debt. This process
is repeated with the customer continuing to pay off the same amount, $A, each month.
(a) Find the value of A for which the customer still owes $8480 at the start of each
month.
(b) If A = 1000, calculate the amount owing at the end of the eighth month.
(c) Show that the value of A for which the whole amount owing is exactly paid off after
the nth payment is given by
8480R"-'(R– 1)
A =
where R=1.06
R" – 1
(d) Find the value of A if the debt is to be paid off exactly after 2 years, ctivate Windows
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