Question

Jennifer bought a brand new treadmill on a credit plan at BeFit Exercise Equipment. BeFit will charge her 15% per year compounded monthly. If her monthly payments will be $150 for 4 years, how much was the original price of the treadmill?

a) $5,390.72
b) $5,389.72
c) $5,388.72
d) $5,392.72
e) $5,385.72

Answer 1

Answer: $ 5,389.72

Explanation:

This is an annuity question.

Using the formula:

P = E [
`(1 - (1+i)^(-n) )/(i)` ]

E = $150

i = 0.15/12 , since it is compounded monthly

ans P is the original price

substituting into the formula , we have

P = 150 [
`(1 - (1+(0.15)/(12)) ^(-48) )/((0.15)/(12) )` ]

P = 150 [
`(1 - 0.550856488)/(0.0125)` ]

P = 150 [
`(0.449143511)/(0.0125)` ]

P = 150 [ 35.93148088]

P = $ 5,389.72