Answer:
The monthly payment necessary for John to pay for his purchases is $88.4 per month
Explanation:
Fixed Installment payment for a fixed period period of time with a specified interest rate is the type of annuity.
According to given data
Present value of appliance= PV = $1,200
Numbers of Payments = n = 18 months
Interest rate = r = 24% annually = 2% monthly
Value on October 1, 2018 = 1200 x ( 1 + 2%)^6-1 = 1,325
Monthly payment can be calculated by using following fomula
PV of annuity = P x [ ( 1- ( 1+ r )^-n ) / r ]
$1,325 = P x [ ( 1- ( 1+ 2% )^-18 ) / 2% ]
$1,325 = P x [ ( 1- ( 1+ 0.02 )^-18 ) / 0.02 ]
$1,325 = P x [ ( 1- ( 1.02 )^-18 ) / 0.02 ]
$1,325 = P x [ ( 1- ( 1.02 )^-18 ) / 0.02 ]
$1,325 = P x 14.992
P = $1,325 / 14.992
P = $88.4
