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Suppose you want to buy a new computer system and the store is willing to sell it to allow you to make monthly payments. The entire computer system costs $3,500. The loan period is for 2 year and the interest rate is 16.9% with monthly compounding. What is your monthly payment? How much will this computer cost you?

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Answer:

Explanation:

Using a financial calculator, input the following;

Present value; PV = -3500

Duration of investment; N = 2*12 = 24 months

Monthly interest rate = 16.9% / 12 = 1.408%

One time future cashflow ; FV = 0

then compute the recurring payment; CPT PMT = $172.87

Therefore, your monthly payment would be $172.87 and the total cost would be 172.87 * 24 = $4,148.88

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