Question

luke wants to buy an ipod. determine the equivalent cash price if luke makes 18 monthly payments of $31.48 at an interest rate of 15.2% compounded monthly

Answer 1

We can use the formula for the present value of an annuity:

PV = PMT x [(1 - (1 + r)^(-n)) / r]

where PV is the present value, PMT is the monthly payment, r is the monthly interest rate, and n is the number of payments.

Substituting the given values, we have:

PV = $31.48 x [(1 - (1 + 0.152/12)^(-18)) / (0.152/12)]

PV = $31.48 x [(1 - 0.5159) / 0.0127]

PV = $1,007.97

Therefore, the equivalent cash price of the iPod is $1,007.97.