Videos: Equations of Value and Compound Interest
What is an Equation of Value?
A recap of what we did with simple Interest:
Today, you take out a $5000 loan at 10% compounded quarterly, which is to be repaid with two equal payments at the end of the first year and at the end of the second year.
- Find the size of the payments.
- How much interest will be paid?
You borrowed $3,000 from your line of credit 8 months ago and a further $5,000 three months ago. You arrange with the bank to pay off the line of credit with 2 payments. The first payment, 6 months from today, will be twice as large as the second payment made one year from today. The bank charges you 9% interest, compounded monthly. Suggested focal Date: 6 months from today.
(a) Find the size of each payment.
(b) How much interest did you pay?
