Question

Please answer these 2 questions. I have solved them and my answers were not correct. Please don't write down the answers I have written in bold font because they are not correct. I just included the wrong answers I came up so you can make sure your answers don't match to those. Thank you in advance!

1. A company buys a machine for $12,000, which it agrees to pay for in five equal annual payments, beginning one year after the date of purchase, at an annual interest rate of 4%. Immediately after the second payment, the terms are changed such that the company can pay off the loan immediately in a lump sum during the following year. What is the final single payment? (The answer is NOT $7,778 or $7,778.35 or $7,779)

2. Trevor needs a new computer for college. His uncle lends him $1,000 at 5 percent interest per year for 3 years. What is the total payment after 3 years if simple interest is used? [x] What is the total payment after 3 years if compound interest is used? [y] Write answers in the following form " 2345.00 ". Do not include $ and be sure to include two decimal places even if they are zeros. (x is NOT 1,150.00 and y is NOT 1,157.63)

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

B $12,000.00 4% 1 Loan Amount Annual interest rate No. of annual repayment Annual Payment $2,695.53 Balance after second payment, to be repaid in single final payment $7,480.33 10 2 Loan Amount Interest rate Term in years $1,000.00 5% 3 Total Payment if simple interest used (X) 1150.00 Total Payment if compound interest used (Y) 1157.63

Cell reference -

A B 2 12000 0.04 mt no 1 Loan Amount Annual interest rate No. of annual repayment Annual Payment =PMT(C3,C4,-C2,0) Balance after second payment, to be repaid in single final payment =PV(C3,3,-C5,,0) 8 10 2 Loan Amount Interest rate 12 Term in years 1000 0.05 11 Total Payment if simple interest used (X) =C10*(1+C11*c12) Total Payment if compound interest used (Y) =C10*(1+C11)^C12 18

Please note: For question (2), your answers are correct with given information. Submit your answer without comma and $ sign. Please discuss in comment if required.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.