Question

Mrs mhlauli purchases a new dining table from Bradley , placing an immediate deposit of R2000 and agreeeing to make monthly repayment of R240 for next 5 years.if the annual interest rate is 6% compounded monthly. What is equivalent cash price of the dining room

Answer 1

given,

downpayment = R2000

A = R240

N = 5

R=6%

m = 12

cash equivalent = down payment + $PV_{r240}$

$=R2000+A\times(\frac{1-(1+\frac{R}{M})^{-M\times N})}{\frac{R}{M}})$

$=R2000+R240\times(\frac{1-(1+\frac{0.06}{12})^{-12\times5}}{\frac{0.06}{12}})$

$=R2000+R240\times(\frac{1-1.005^{-60}}{0.005})$

$=R2000+R240\times51.73$

$=R2000+R12414.13$

$=R14414.13$

ANSWER: R 14,414.13