My Math Forum Loan

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 July 3rd, 2010, 10:55 AM #1 Newbie   Joined: May 2010 Posts: 5 Thanks: 0 Loan Hello, since an exam is coming up, I was practicing. Came across a question and solved it, but want to make sure if it is correct. Q)An overseas student wishes to take a loan for $60,000 to pay for his university studies. The bank agrees to let him pay in three installments:$10,000 due in 3 years time, $30,000 due in 10 years time and the balance at the end of the 15 year period. Calculate the amount of the final payment if the interest rate is 6% compounded six monthly. A) this is how i solved it: 1) 10,000 (1+0.06/6)^6 = 10,615.20 2)30,000 (1+0.06/20)^20 = 31,852.24 So, there is 20,000$ remaining. 3)20,000(1+0.06/30)^30 = 21235.46 Is this correct? do I need to add something? Much appreciated.
 July 3rd, 2010, 11:21 AM #2 Global Moderator     Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 932 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Loan You divide by 6 and 20 when you should be dividing by 2 (two payments per year). But more than that, you're having the student *earn* interest rather than *pay* interest in the first two calculations, which isn't right. You need to take the principle ($60,000) accrue interest for 3 years, subtract$10,000, accrue interest for 7 years, etc.
 July 3rd, 2010, 11:28 AM #3 Newbie   Joined: May 2010 Posts: 5 Thanks: 0 Re: Loan Ok, re-did it again and this is what I got. By using S=P(1+i)^n. S= 60,000(1+0.06/2)^30 = 145,635.74 S1=10,000(1+0.06/2)^24 = 20,327.94 S2=30,000(1+0.06/2)^10 = 40,317.49 FP= 145,635.74 - 20,327.94 - 40,317.49 = 8499.31 Is this one correct? Appreciate your quick reply
July 5th, 2010, 08:08 AM   #4
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Re: Loan

Quote:
 Originally Posted by CoolX Is this one correct?
Looks like it. Not the way ?I was thinking of doing it, but valid nonetheless. I didn't check the numbers, just that it was set up properly (so I'm trusting your calculator).

 October 27th, 2010, 02:51 AM #5 Newbie   Joined: Oct 2010 Posts: 1 Thanks: 0 Re: Loan Yes it is correct within this interest rates. The main principle will change then your calculator will give right answer.

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