Question:
On April 1, 2013, John Vaughn purchased appliances from the Acme Appliance Company for $1,200. In
order to increase sales, Acme allows customers to pay in installments and will defer any payments for six
months.
John will make 18 equal monthly payments, beginning October 1, 2013. The annual interest rate implicit
in this agreement is 24%.
Required:
Calculate the monthly payment necessary for John to pay for his purchases.
Answer:
PV = ? x .90573= 1,200
PV = $1,200 = $1,325
.90573
Present value of $1: n = 5, i = 2% (from Table 2)
PVA = ? x 14.99203= $1,325
annuity amount
PVA = $1,325 = $88 = Payment
14.99203
Present value of an ordinary annuity of $1: n = 18, i = 2% (from Table 4)
On April 1, 2013, John Vaughn purchased appliances from the Acme Appliance Company for $1,200. In
order to increase sales, Acme allows customers to pay in installments and will defer any payments for six
months.
John will make 18 equal monthly payments, beginning October 1, 2013. The annual interest rate implicit
in this agreement is 24%.
Required:
Calculate the monthly payment necessary for John to pay for his purchases.
Answer:
PV = ? x .90573= 1,200
PV = $1,200 = $1,325
.90573
Present value of $1: n = 5, i = 2% (from Table 2)
PVA = ? x 14.99203= $1,325
annuity amount
PVA = $1,325 = $88 = Payment
14.99203
Present value of an ordinary annuity of $1: n = 18, i = 2% (from Table 4)
