Question

Jennifer bought a brand new treadmill on a credit plan at BeFit Exercise Equipment. BeFit will charge her 15% per year compounded monthly. If her monthly payments will be $150 for 4 years, how much was the original price of the treadmill?
a) $5,390.72
b) $5,389.72
c) $5,388.72
d) $5,392.72
e) $5,385.72

Answer 1

Answer: $ 5,389.72

Step-by-step explanation:

This is an annuity question.

Using the formula:

P = E [ $\frac{1 - (1+i)^{-n} }{i}$ ]

E = $150

i = 0.15/12 , since it is compounded monthly

ans P is the original price

substituting into the formula , we have

P = 150 [ $\frac{1 - (1+\frac{0.15}{12}) ^{-48} }{\frac{0.15}{12} }$ ]

P =  150 [ $\frac{1 - 0.550856488}{0.0125}$ ]

P = 150 [ $\frac{0.449143511}{0.0125}$ ]

P = 150 [ 35.93148088]

P = $ 5,389.72