SOLUTION: Sara borrowed funds to buy furniture for her business. Her business paying $200 at the end of each month for four years. The bank charges interest on the loan at 8% compounded mont

Question 1144414: Sara borrowed funds to buy furniture for her business. Her business paying $200 at the end of each month for four years. The bank charges interest on the loan at 8% compounded monthly.
a. What was the cash price of the furniture?
b. How much is the cost of financing?

Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
she pays 200 at the end of each month for 4 years a 8% interest rate per year compounded monthly.

using the onlline finanancial calculator found at https://arachnoid.com/finance/, you would make the following entries.

present value = 0
future value = 0
number of time periods = 4 years * 12 months per year = 48 months,
interest rate per time period = 8% per year / 12 = .66666667% per month.
payment per month is equal to -200 (negative because it's money going out).
payments are made at the end of each time period.
you would then click on PV and the calculator will tell you that the value of the furniture that you bought on time is equal to 8,192.38.
to find out the financing charge, you would multiply the monthly payments by 48 to get 9600.
you would subtract the present value of the loan to get the interest charge.
that would be equal to 9600 - 8192.38 = 1407.62.

here's a display of the results from using the online calculator.

$$$

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