College Algebra 7th Edition

Published by Brooks Cole
ISBN 10: 1305115546
ISBN 13: 978-1-30511-554-5

Chapter 8, Sequences and Series - Section 8.4 - Mathematics of Finance - 8.4 Exercises - Page 622: 16


30 years: $\$ 643.70$ 15 years: $\$ 811.41$

Work Step by Step

We are given: $A_{p}=80000, i= \frac{0.09}{12}=0.0075, n=30*12=360$ The present value of an annuity is given by: $A_{p}=R \frac{1-(1+i)^{-n}}{i}$ We solve for $R$: $R=\frac{iA_{p}}{1-(1+i)^{-n}}:$ $R=\frac{(0.0075)(80000)}{1-(1+0.0075)^{-360}}=\$ 643.70$ We re-calculate this for a 15 year period ($n=15*12=180$) $R=\frac{0.0075*80000}{1-(1+0.0075)^{-180}}=\$ 811.41$
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