(a) Explanation Given: Tom charged $8430 on his credit card. The money will be repaid in 3 years with the interest rate 27% compounded monthly. Formula used: The periodic payment of an annuity is R = P i [ 1 − ( 1 + i ) − n ] Where, P is the present value; i is the interest rate per period n is the number of payments. Calculation: Given that, the present value is P = $ 8430 . The annuity is compounded monthly. Thus the number of period in a year is m = 12 . The annuity is for 3 years, that is the number of periods is 12 × 3 = 36 . It is given that the interest rate is 27%, that is, i = 0.27 . Thus, the interest rate per period is 0.27 12 = 0.0225 . Use the above mentioned formula to obtain the future value of the ordinary annuity. Substitute P = $ 8430 , i = 0 (b) To determine To find: The amount of total interest.

10th Edition

ISBN: 8220102020252

Author: RITCHEY

Publisher: PEARSON

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Chapter 5.3, Problem 38E

(a)

To determine

To find: The amount of the each payment.

(b)

To determine

To find: The amount of total interest.

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Chapter 5.3, Problem 37E

Chapter 5.3, Problem 39E

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The amount of the each payment.

Solution Summary: The author explains how Tom charged 8430 on his credit card. The money will be repaid in 3 years with the interest rate 27% compounded monthly.