Question

Sheds R Us sells $700 sheds on a monthly payment plan over 5 years.

a) If the interest rate is 3% per month, find the monthly payment.

Answer = $

b) If instead the interest rate is 3.25% per month, find the monthly payment

Answer = $

Answer 1

Given, Total Amount = $700

Time Period = 5 Years = 60 Months

a) Interest Rate = 3% pm

Let M be Monthly Amount

Therefore $700 = M * PVIFA (3%,60)

As per Present Value of Annuity Table PVIFA(3%,60) = 27.668

Hence $700= M * 27.668

Monthly Payment (M) = $25.3

b) Interest Rate = 3.25% pm

Let M be Monthly Payment

Therefore $700 = M * PVIFA (3.25%,60)

As per Present Value of Annuity Table PVIFA(3.25%,60) = 26.2467

Hence $700 = M * 26.2467

Montgly Payment (M) = $26.67