Question

An engineer wanted to celebrate graduating and getting a job by buying new furniture for $2400. Luckily the store was offering 6-month financing at an interest of 6%/year compounding monthly. Calculate the monthly payment. PLEASE show how to do this on excel!!

Answer 1

Price of furniture, P = $ 2400

Interest rate, i = 6% per year

Interest rate, i = 0.5% per month

Time, n = 6 months

First of all we are required to write the equation in the mathematical expression

$P = \frac{A}{1+i} + \frac{A}{(1+i)^2}+...+\frac{A}{(1+i)^6}$

$P = \frac{A}{i}[1-\frac{1}{(1+i)^6}]$

$P = A*PVIFA(i\%,6)$

A is the monthly payment

$2400 = A*PVIFA(0.5\%,6)$

$2400 = A*5.896384$

A = $ 407.03 per month

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