Finance 301

In: Business and Management

Submitted By coccon
Words 973
Pages 4
1/
This problem is about determining the amount of monthly payment given the Present value, APR, and number of payments. Therefore, the only equation that I have to rely on is:

And the result that I obtain from this equation is as follow:
|Scenario: |Monthly Payment |
|i. |$ 456.22 |
|ii. |$ 478.06 |
|iii. |$ 434.99 |
|iv. |$ 405.53 |
|v. |$ 481.56 |
|vi. |$ 394.50 |
|vii. |$ 549.29 |

But while doing it on Excel, I think it’s easier to separate the formula into two parts: ➢ First: I calculate the PVIFA separately. ➢ Second: Divided the Present Value by the PVIFA just calculated

Summary and Interpretation: Back to the problem, as the numbers show; the lower the APR, the lower the monthly payment will be. It’s because that you would not have to pay as much interest. Other Scenarios shows that the lower the present value (scenarios iv. and v.) the lower the monthly payment. The reason for that is; with the fixed number of payments, the less amount of debt that you have, the less you have to in each payment. Finally when the number of payments changes, it effects the amount that you’d have to pay in each payment as well. For example, if you decide to pay your debt in a longer period of time, obviously you would not have to pay as much.

2/
In this problem, beside Present Value issue, the Future Value issue is what we also have to deal with. Therefore, along with the Present Value equation that I used in the first problem, the Future Value equation would have to be used for this problem:
|Scenario |Amount of yearly deposit |
|i. |$ 859.26…...

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