Finance Question (1 Viewer)

[qqmore]

Please help me with this hard finance QNS:

A company buys machinery for $500 000 and pays it off by 20 equal 6monthly installments, the first payment being made 6 months after the loan is taken out. If the interest rate is 12% pa, compounded monthly, how much will each installment be?




Cheers

 

[lolokay]

I got $44131. Did you enter it wrongly into excel, or have I made a mistake?
Also, wouldn't the interest rate be (1.01)⁶, as opposed to (1.01)¹²/2 ?

actually, I think this bit would be wrong
"Then use the normal normal forumula, using 0.1268250 as the annual rate and just dividing it by 2."

 

[qqmore]

lolokay's answer is right....... could you kindly show the working as well though =S

 

[lolokay]

it's 20 installments not 20 years ^

my working was:
A = 500,000
I = (1 + 0.12/12)^6
n = installments
AI^20 - nI^19 - ... n = 0
(nI^20 - n)/(I-1) = AI^20
n = AI^20(I-1)/(I^20-1)

then plug in values

 

[qqmore]

Cheers,
I found where I made my mistake, for Sn = a(r^n -1) / r -1 => I used r = 1.01 instead of (1.01)^6 in the bottom =S