Question

Interest Theory and ADV. Alg. Question!
Hi! I just need someone to help explain how an example got a certain answer. Circled in picture. Really need accurate, step by sep, responces.

Answer 1

@zepdrix @Directrix @Ashleyisakitty @Conqueror @mathmate Quick and easy question! Help much appreciated!

Answer 2

5% p.a. = 0.05/12=0.004166667
(1+5%)^360=1.0041666666667^360=4.4677
In the example, 1.0041666667 was (incorrectly) rounded to 1.0042.
This shows the importance of understanding significant figures.

Answer 3

p.a? I'm going to upload a photo of my work because i just cant understand where some of the numbers are coming from.

Answer 4

need me to rotate for you?

Answer 5

why would you do ^360 two times?

Answer 6

@mathmate

Answer 7

... :(

Answer 8

@kaylaprincess
p.a. = per annum, means nominal yearly interest
I can only explain the inconsistency where you circled.
Without the complete problem, I do not know what the calculation was trying to do.
Please provide question with your work, so I can follow what you're trying to do.
Yes, in the future, please rotate. My neck is about to hurt! lol

Answer 9

Gotcha. Just figuring the monthly payment for an A-R Mortgage
Here are the credentials : Buying a home, (we can name the person Bob i guess thats buying the home) for $300,000
The loan has a 5% interest rate w/ terms 5/1 and a 2/7 cap for 30yrs

Answer 10

The calculation is about a fixed 5%, cap was not applied.
Recall that the formula for calculating payment is:
Monthly payment, A,
\(\Large A=\frac{i(P(1+i)^{nt})}{(1+i)^{nt}-1}\)
which is exactly what was done in the example.
We need to do the (1+i)^(nt) top and bottom because they do not simplify.

Answer 11

Why was the Principal moved to the top?

Answer 12

It should always be on top because the more we borrow, the more is the monthly payment (i.e. proportionality).