New Bread Bakery purchased new equipment by making a down payment of $2000 and agreeing to make payments of $458 at the end of each month for five years. Interest is 9.2% compounded monthly. What was the purchase price of the new equipment? How much interest will have to be paid?

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Answer to a math question New Bread Bakery purchased new equipment by making a down payment of $2000 and agreeing to make payments of $458 at the end of each month for five years. Interest is 9.2% compounded monthly. What was the purchase price of the new equipment? How much interest will have to be paid?

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Gene

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108 Answers

r = \frac{0.092}{12} = 0.0076667

PV = 458 \frac{1 - (1 + 0.0076667)^{-60}}{0.0076667}

PV = 458 \frac{1 - (1.0076667)^{-60}}{0.0076667}

PV \approx 458 \times 47.9646 \approx \$21,960.57

\text{Total Paid} = 458 \times 60 = \$27,480

\text{Interest Paid} = 27,480 - 21,960.57 = \$5,519.43

\text{Total Purchase Price} = 21,960.57 + 2,000 = \$23,960.57

\text{Purchase Price} = \$23,960.57

\text{Total Interest Paid} = \$5,519.43

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