Answer :
To determine which group of values is correct to use in the TVM Solver for calculating the number of payments Kendra needs to make, we need to consider several key details from the problem:
1. Loan Amount (PV - Present Value): Kendra took out a loan of [tex]$750. In TVM Solver terms, this is the present value (PV), and since it's a loan, it's entered as a negative value (-750).
2. Interest Rate (I%): The Annual Percentage Rate (APR) is 8.4%. Since we want to find the number of monthly payments, we need to consider the monthly interest rate for this. To get the monthly interest rate, we divide the annual rate by 12 months.
3. Monthly Payment (PMT): Kendra’s monthly payment is $[/tex]46.50.
4. Final Value (FV): At the end of the loan, we want the balance to be 0, so FV = 0.
5. Payments per Year (P/Y): Since Kendra makes monthly payments, P/Y is 12.
6. Compounding Periods per Year (C/Y): The loan also compounds monthly, so C/Y is 12.
Next, we examine the options:
- Option A: Here, the interest rate provided per period is incorrect. It uses a monthly rate of 0.7%, which is not consistent with an 8.4% APR divided over 12 months. Furthermore, P/Y is set to 1, which is not correct because payments are made monthly.
- Option B: This option has the correct annual interest rate of 8.4% listed, but it incorrectly uses P/Y as 1, not 12. This setup doesn't recognize monthly payments.
- Option C: It lists the annual interest rate of 8.4% but splits it over monthly payments with P/Y = 12 and C/Y = 12. This aligns correctly with Kendra's monthly payment plan, making this option correct.
- Option D: This suggests a monthly interest rate of 0.7% (incorrect for this scenario) and uses monthly settings for P/Y and C/Y, but the interest rate is not calculated correctly from the annual rate.
From analyzing these options based on the given criteria, Option C correctly sets up the TVM Solver with the values needed to calculate the number of payments required, making it the right choice.
1. Loan Amount (PV - Present Value): Kendra took out a loan of [tex]$750. In TVM Solver terms, this is the present value (PV), and since it's a loan, it's entered as a negative value (-750).
2. Interest Rate (I%): The Annual Percentage Rate (APR) is 8.4%. Since we want to find the number of monthly payments, we need to consider the monthly interest rate for this. To get the monthly interest rate, we divide the annual rate by 12 months.
3. Monthly Payment (PMT): Kendra’s monthly payment is $[/tex]46.50.
4. Final Value (FV): At the end of the loan, we want the balance to be 0, so FV = 0.
5. Payments per Year (P/Y): Since Kendra makes monthly payments, P/Y is 12.
6. Compounding Periods per Year (C/Y): The loan also compounds monthly, so C/Y is 12.
Next, we examine the options:
- Option A: Here, the interest rate provided per period is incorrect. It uses a monthly rate of 0.7%, which is not consistent with an 8.4% APR divided over 12 months. Furthermore, P/Y is set to 1, which is not correct because payments are made monthly.
- Option B: This option has the correct annual interest rate of 8.4% listed, but it incorrectly uses P/Y as 1, not 12. This setup doesn't recognize monthly payments.
- Option C: It lists the annual interest rate of 8.4% but splits it over monthly payments with P/Y = 12 and C/Y = 12. This aligns correctly with Kendra's monthly payment plan, making this option correct.
- Option D: This suggests a monthly interest rate of 0.7% (incorrect for this scenario) and uses monthly settings for P/Y and C/Y, but the interest rate is not calculated correctly from the annual rate.
From analyzing these options based on the given criteria, Option C correctly sets up the TVM Solver with the values needed to calculate the number of payments required, making it the right choice.