math problem?
You would like to buy a boat. Financing is available at 8.4% compounded monthly for 3 years. You can afford a payment of $375 per month. What is the maximum loan you can afford?
Public Comments
- The formula for equal monthly payments (M) on a principle P at an interest rate i over n time periods is: M = [Pi(1 + i)^n] / [(1 + i)^n - 1] I presume you mean that the annual rate of 8.4 percent is a result of compounding the monthly rate. In this case, the monthly rate would be 0.67% (i.e., 1.0067^12 = 1.084) Plugging these values into the above equation and solving for P, you have: 375 = [P*.0067 *1.0067^36] / [(1.0067^36) - 1] P = $11,959.80 Make sure my assupmtion about the monthly interest rate is correct, and double check the artihmetic
