Question

Tammie wants to buy a scooter that costs $3,500. Her mom will loan her the money at 5% annual interest as long as she makes monthly payments over the next 3 years. How much will Tammie's monthly payment be?

N
I/Y
PV
PMT
FV

Harrison wants to double his money in 10 years. What annual rate of return must he find in an investment to reach his goal?

N	10
I/Y	7.2%
PV
PMT
FV

Answer 1

1.

Loan Amount = $3,500

Time Period = 3 years

Interest Rate = 5%

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = -3,500, N = 36, FV = 0, I/Y = 0.05/12]

PMT = $104.90

Monthly Payment = $104.90

2.

Time Period = 10 years

PV = 1

FV = 2

PMT = 0

Calculating Interest Rate,

Using TVM Calculation,

I/Y = [PV = -1, FV = 2, PMT = 0, T = 10]

I/Y = 7.18%

Annual Interest Rate = 7.18%

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