SOLUTION: Anne borrows ​$4000 and agrees to pay ​$500 plus interest of 2​% on the unpaid balance each month. Find the payments for the first six months and the remaining de
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Question 1116675: Anne borrows $4000 and agrees to pay $500 plus interest of 2% on the unpaid balance each month. Find the payments for the first six months and the remaining debt at the end of that period. What are the first six payments, in dollars? What is the remaining debt at the end of that period?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
the number of months required for the loan to be fully paid off is 8.804558331.
after 6 months:
the remaining balance on the loan will be 1350.589195.
the amount of the principal that was already paid will be 2649.410805.
the interest that was already paid will be 350.5891955.
i used the texas instruments business analyst II (TIBA2) calculator.
i also used excel to show the month by month calculations.
both sources agree.
in the TIBA2 calculator, i did the following:
I/Y = 2
PV = 4000
PMT = -500
FV = 0
2d PMT (BGN) = END
i then had the calculator compute N for me.
this gave me the number of months required for the loan to be fully paid off.
to find out the remaining balance at the end of 6 months, i then did the following:
2d PV (AMORT)
calculator asks for P1 which is the start month.
i entered 1 and then hit ENTER and then hit the down arrow key.
calculator asks for P2 which is the end month.
i entered 6 and then hit ENTER and then hit the down arrow key.
it told me that the remaining balance was 1350.589195.
i then hit the down arrow key again.
it told me that the principal paid was 2649.410805
i then hit the down arrow key again.
it told me that the interest paid was 350.5891955.
if you look at the excel values for the end of month 6, you will see that excel agrees with this.
these are shown below:
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