# Need help with financial maths question (1 Viewer)

#### RakeshCristoval

##### Member
Hey guys, can someone explain how to do Q17?
Cheers

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#### Drongoski

##### Well-Known Member
The formula for monthly repayment, M, that you may not use for the HSC is:

$\bg_white M = P\times \frac {r(1+r)^n}{(1+r)^n -1}$

where P = $200000, n = 20 x 12 = 240 compounding periods and r = .06/12 = 0.005 = interest rate per compounding period so that $\bg_white M = 200000 \times \frac {0.005 \times 1.005^{240}}{1.005^{240} - 1} = 1432.86$ i.e.$1432.86 per month.

Over the life of the loan, Pedro would have paid: 240 x $1432.86 =$343,886.40

Therefore total interest paid = $343,886.40 -$200,000 = \$143,886.40.

In the HSC, you are required to derive the solution, which takes too long to type out.

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#### quickoats

##### Well-Known Member
Schools typically teach this in different ways - the present value (PV) method is probably the simplest but idk if it's taught in schools. The above ^^^ is pretty much the PV method.

The way you'd do it is to find the balance as the loan is paid off month by month and sort it out from there.

The total amount paid is 240*M

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#### Drongoski

##### Well-Known Member
Yes, that's the prescribed approach expected in the HSC.

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#### RakeshCristoval

##### Member
Schools typically teach this in different ways - the present value (PV) method is probably the simplest but idk if it's taught in schools. The above ^^^ is pretty much the PV method.

The way you'd do it is to find the balance as the loan is paid off month by month and sort it out from there.

View attachment 28836

The total amount paid is 240*M
Schools typically teach this in different ways - the present value (PV) method is probably the simplest but idk if it's taught in schools. The above ^^^ is pretty much the PV method.

The way you'd do it is to find the balance as the loan is paid off month by month and sort it out from there.

View attachment 28836

The total amount paid is 240*M
cheers guys