4. a) Determine the monthly payment if the furniture bill is not paid by the due date Payments and compounding of interest are monthly. [A 2] b) Determine how much Jane and Bill will pay for the furniture, including interest. [A 1] c)What is the total interest paid? [A 1] N 1% PV PMT FV P/Y C/Y PMT: END BEGIN

Question

4. a) Determine the monthly payment if the furniture bill is not paid by the due date Payments and compounding of interest are monthly. [A 2] b) Determine how much Jane and Bill will pay for the furniture, including interest. [A 1] c)What is the total interest paid? [A 1] N 1% PV PMT FV P/Y C/Y PMT: END BEGIN

Answer 1

### a)

4200### c) $700

Answer 2

## Step 1: Convert Annual Interest Rate to Monthly and Calculate Number of Payments### The annual interest rate is 18%, so the monthly interest rate is

. The loan term is 2 years, which is equivalent to

months.## Step 2: Calculate the Monthly Payment### We are given that the present value (PV) of the loan is

PMT = \frac{PV \times i}{1 - (1 + i)^{-n}}

i

n

PMT = \frac{3500 \times 0.015}{1 - (1 + 0.015)^{-24}} = \frac{52.5}{1 - (1.015)^{-24}} \approx \frac{52.5}{1 - 0.70} \approx \frac{52.5}{0.30} \approx 175

175 \times 24 = 4200

4200 - 3500 = 700$.

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Solution

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Explanation