SOLUTION: Find the periodic payment that will render the sum. S = $26,000, interest is 18% compounded monthly, payments made at the end of each month for 3 Years A) $549.96 B) $7278.02

Algebra ->  Equations -> SOLUTION: Find the periodic payment that will render the sum. S = $26,000, interest is 18% compounded monthly, payments made at the end of each month for 3 Years A) $549.96 B) $7278.02       Log On


   

Question 201887: Find the periodic payment that will render the sum.
S = $26,000, interest is 18% compounded monthly, payments made at the end of each month for 3 Years
A) $549.96
B) $7278.02
C) $692.62
D) $576.30
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
payment is $549.96 per month which is answer (A).
What it appears you are looking for is the annuity for a future amount.
The future amount is $26,000
The formula used to get this amount would be:
PMT%28FV%29+=+%28FV%2F%28%28%28%28%281%2Bi%29%5En%29-1%29%2Fi%29%29%29
PMT(FV) means payment for a future amount which is also called future value.
FV means future value
i = interest rate per time period
n = number of time periods
In this problem the time period was in months because the payments were made monthly and the interest rate was compounded monthly.
the annual interest rate was divided by 12 to get the monthly interest rate.
please note that interest rate = % interest / 100%. since the annual % interest was 18%, the annual interest rate was .18. In the formula, the interest rate is used, not the % interest.
for this problem, the monthly interest became .18/12 = .015 which is the same as 1.5% expressed as a rate.
the number of time periods was multiplied by 12 to get the number of time periods expressed in months.
for this problem the number of timer periods became 3 * 12 = 36.
after taking care of all that, just plug the numbers into the formula and calculate the result.