Problem 4-78 (algorithmic) Question Help You owe your best friend $2,000. Becaus

Question

Problem 4-78 (algorithmic) Question Help You owe your best friend $2,000. Because you are short on cash, you offer to repay the loan over 10 months under the following condition. The first payment will be $90 at the end of month one. The second payment will be $90+ G at the end of month two. At the end of month three, you'll repay $90+ 2G. This pattern of increasing G amounts will continue for all remaining months a. What is the value of G if the interest rate is 0.5% per month? b. What is the equivalent uniform monthly payment? c. Repeat Part (a) when the first payment is $120 (i.e., determine G).

Explanation / Answer

Solution:-

(A).$2,000 = $90(P/A, .5%, 12) + G(P/G, .5%, 12)

                $2,000 = $90(11.6189) + G (63.214)

                $2,000 = $1045.70 + G (63.214)

                G = $15.1

(B) A = $2,000(A/P, .5%, 12) = $172.13

(D) $2,000 = $120(P/A, .5%, 12) + G (P/G, .5%, 12)

                $2,000 = $120(11.6189) + G (63.214)

                $2,000 = $1394.27 + G (63.214)

                G = $9.58

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