Consumer mathematics.

Consumer mathematics
Introduction
This exercise will demonstrate the use of mathematical principles to handle practical business
and finance problems such as loan repayment, mortgage and payments and general future
planning
Question 1: Compound Interest
Solution
Principal amount, P = $4800
Interest rate, r = 10% per annum
The rate of interest per month is: r = 10/(1200) = 0.008333
Duration of repayment = n = 3 years
Total number of months = n×12 = 3 × 12 = 36
Since the loan is paid per month, we can consider this as EMI
From the relationship;
EMI = P×r (1 + r)n / ((1 + r)n – 1)
EMI = 4800 × 0.008333 (1 + 0.008333)36/ ((1 + 0.008333)36 -1)
= $154.88
Therefore, his total installment cost, C = 154.88 × 36 = 5575.68 $
Total interest = C – P = 5575.68 – 4800 = $775.68
Question 2: Annuity Payment
Solution
Let monthly deposit be denoted by D
r is the rate of interest per year = 7%
Therefore, interest rate per month = 0.07
12 0.005833