A school realizes that they need a new copy machine for their main office. The copy machine costs $5,500. After speaking with the financial advisor, they decide to pay 20% of the cost of the machine in cash and finance the rest through their credit union. How much is their monthly payment if the credit union will charge 4% per year compounded monthly for 3 years?
a) $37.77
b) $27.77
c) $131.02
d) $109.91
e) $129.91
f) None of the above.

Question

A school realizes that they need a new copy machine for their main office.  The copy machine costs $5,500.  After speaking with the financial advisor, they decide to pay 20% of the cost of the machine in cash and finance the rest through their credit union.  How much is their monthly payment if the credit union will charge 4% per year compounded monthly for 3 years?
a) $37.77
b) $27.77
c) $131.02
d) $109.91
e) $129.91
f) None of the above.

mathstudent55 · Answer

|dw:1356586079516:dw|
where A is monthly payment,
P = present value,
n = interest period (years times payments per year),
r = rate of interest (in decimal) per interest period