Ed is buying a new home entertainment system that costs $32,000. His payments ar

Question

Ed is buying a new home entertainment system that costs $32,000. His payments are $711.82 per month and he has financed the system for 60 months. What is the annual interest rate?

N

I/Y

PV

PMT

FV

Jazlyn will receive $100,000 in five years from her grandmother’s estate. However, Jazlyn needs the money today. Andrea has offered to give her the money now but requires an 18 percent return (discount rate) in exchange for getting the money early. How much should Jazlyn expect to receive today?

N

I/Y

PV

PMT

FV

N

I/Y

PV

PMT

FV

Explanation / Answer

So, for first question using finance calculator we are solving, use the following inputs :-

PV $32,000

PMT - $(711.82)

N = 60

Calculate I/Y we get 1.038% and since its monthly we will multiple it by 12 to get yearly interest rate 1.038*12 = 12.46% annual interest rate.

Second question :-

FV - $100,000

N - 5 years

I/Y - 18%

Calculate PV - $43,710.92 considering annual compounding, this answer will be different if we use monthly compounding.

Please let me know if you face any issues :-)

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