Question 335578: In order to calculate the number of years necessary for a given payment schedule, the formula can be written as shown below. If you can afford only a monthly payment of $130, will you be able to pay off the debt? If so, how long will it take? If not, why not?
FORMULA: t=log(1-Pr/Mn)/-nlog(1+r/n)
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! Given the amount you are paying off on a loan at each payment period will always be equal to $130.00, then amount of time required to pay off the loan is dependent on the original amount of the loan and the interest rate of the loan for each time period.
It is also dependent on whether you are paying off the loan at the beginning of each time period or at the end of each time period, although this might be a detail that you do not need to worry about for this problem.
If the interest charged per time period is greater than the payment, then you will never be able to pay off the loan.
An example:
You are given:
your payments are $130 per month.
The loan is equal to $10,000.
Payments are made at the end of each time period.
If the interest rate charged per month is .008, then:
.008 * $10,000 = $80 interest per month and you will be able to pay off the loan in 119.9160519 months.
If the interest rate charged per month is .013, then:
.013 * $10,000 = $130 interest per month and you will never be able to pay off the loan because the interest charged per month is greater than or equal to the payment you are making.
If you drop the interest rate charged per month to something less than .013, then the loan will be able to be payed off.
Specifically, if the interest rate charged per month is .0129, then:
.0129 * $10,000 = $129 interest per month and you will be able to pay off the loan in 379.7568201 months.
I might be able to help you further with your formula if I understood what each of the variables meant.
The formula is:
t=log(1-Pr/Mn)/-nlog(1+r/n)
What does t represent?
What does Pr represent?
What does Mn represent?
What does n represent?
What does r represent?
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