Ralph has just borrowed $1800 to purchase a new stereo, at a nominal rate of interest...
Ralph has just borrowed $1800 to purchase a new stereo, at a
nominal rate of interest of 11.8% convertible monthly. Although he
is charged interest from the moment he borrows the money, the first
payment is not due for 7 months. If he will make 24 monthly
payments, how much interest is in the 17th payment?
Homework Answers
FV of amount borrowed in 7 months = 1800 *(1+0.118/12)^7
Amount in 7 months = $1927.62
Now convert this amount in 24 month equal installments by using excel function PPMT and IPMT
PPMT will give principal amount for each month
IPMT will give interest amount for each month
So after calculating interest amount for 17th payment is $6.82
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