My Math Forum Loan

 Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

 July 3rd, 2010, 11:55 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, 12:21 PM #2 Global Moderator     Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 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, 12:28 PM #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, 09:08 AM   #4
Global Moderator

Joined: Nov 2006
From: UTC -5

Posts: 16,046
Thanks: 938

Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms
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, 03:51 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.

 Tags loan

 Thread Tools Display Modes Linear Mode

 Similar Threads Thread Thread Starter Forum Replies Last Post Denis Algebra 1 July 8th, 2016 06:22 PM Denis New Users 1 June 5th, 2013 10:45 AM pinny Elementary Math 1 April 3rd, 2013 08:40 AM Brandonlive Elementary Math 1 September 14th, 2012 07:29 AM Wizard and Chips Algebra 1 June 9th, 2009 08:32 AM

 Contact - Home - Forums - Cryptocurrency Forum - Top