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On April 1, 2021, John Vaughn purchased appliances from the Acme Appliance Company for $1,200. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. John will make 18 equal monthly payments, beginning October 1, 2021. The annual interest rate implicit in this agreement is 24%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:Calculate the monthly payment necessary for John to pay for his purchases. (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Answer :

Shahzaibfaraz

Answer:

Monthly Payment = $58.91560841 rounded off to $59

Explanation:

First we need to compute the Future value of $800 after 6 months at an interest rate of 24%.

We will convert the 24% annual rate into monthly rate and use the monthly compounding period to calculate the future value.

FV Factor = (1 + r)^t

FV factor = (1 + 0.24/12)^0.5*12

FV Factor = 1.126162419

FV after 6 months = 800 * 1.126162419

FV after 6 months = $900.9299354

Now we need to calculate the monthly payment for an annuity due of 18 months at a monthly rate of 2% (24% / 12) that has a present value equal to 900.9299354.

The formula for the present value of annuity due is attached.

900.9299354  =  Monthly Payment  * [( 1 - (1+0.02)^-18) / 0.02] * (1+0.02)

900.9299354 = Monthly Payment  *  15.29187188

900.9299354  /  15.29187188  =  Monthly Payment

Monthly Payment = $58.91560841 rounded off to $59

${teks-lihat-gambar} Shahzaibfaraz

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