Loan Payment

I’m stuck on a Algebra question and need an explanation.

In Chapter 1 of the text we looked at calculating a monthly payment for a loan. A related formula is to calculate the amount accruing when regular payments are made into an interest bearing account – often called the Savings Plan formula.

(A is the accrued amount after t years of making regular payments, PMT, into an account at interest rate, r%, compounded n times each year.)

A(t) = PMT·((1 + r/N)N·t – 1)/(r/N)

= PMT*((1 + r/N)^(N*t) – 1)/(r/N)

The second version is essentially in the form used in Excel

Suppose you want to buy a car and have decided that you can save $100 a month. Using information from an internet source, determine the current interest rate on savings accounts and use the information to answer the following:

  1. How much money will you have saved in two year’s time?
  2. How much will be interest?
  3. Why wouldn’t a linear model work here?

Here is one option to research accounts that does not require personal information: NerdWallet

A Microsoft Excel spreadsheet is required for this D

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