Answer :
To find out which group of values is correct for calculating the number of payments Kendra will have to make using the TVM (Time Value of Money) Solver, let's break down the given options:
When dealing with loans and the TVM Solver, the following parameters are key:
1. Interest Rate per Period: Since the loan has an 8.4% Annual Percentage Rate (APR) compounded monthly, we need to convert this annual rate to a monthly one. The monthly interest rate is calculated by dividing the annual rate by 12. So, the monthly interest rate is [tex]\( \frac{8.4\%}{12} = 0.7\% \)[/tex].
2. Present Value (PV): This is the amount of the loan Kendra took out, which is [tex]$750. However, in the context of loans, this amount is considered negative because it's money borrowed from the bank, not money you have. Therefore, \( PV = -750 \).
3. Payment (PMT): Kendra is making monthly payments of $[/tex]46.50.
4. Future Value (FV): This represents the balance you want after all payments are made, which is $0 since the loan will be completely paid off.
5. Payments Per Year (P/Y): Kendra is making monthly payments, so there are 12 payments per year.
6. Compounding Periods Per Year (C/Y): Since the interest is compounded monthly, there are 12 compounding periods in a year.
Now, let's evaluate each option to see which one correctly applies these values:
- Option A: Lists P/Y as 1, which is incorrect. It should be 12 for monthly payments.
- Option B: Lists P/Y as 12, which is correct for monthly payments, matches with our calculated monthly interest rate of 0.7%, and uses the correct values for the other parameters.
- Option C: Uses an incorrect interest rate of 0.7, instead of inputting the APR which should be noted as 8.4 and then internally processed as monthly.
- Option D: Appears to have a mix-up with both the interest rate and the future value and present value entries.
Based on this analysis, the correct choice is Option B as it correctly applies all parameters necessary for calculating the number of payments Kendra will need to make to pay off her loan.
When dealing with loans and the TVM Solver, the following parameters are key:
1. Interest Rate per Period: Since the loan has an 8.4% Annual Percentage Rate (APR) compounded monthly, we need to convert this annual rate to a monthly one. The monthly interest rate is calculated by dividing the annual rate by 12. So, the monthly interest rate is [tex]\( \frac{8.4\%}{12} = 0.7\% \)[/tex].
2. Present Value (PV): This is the amount of the loan Kendra took out, which is [tex]$750. However, in the context of loans, this amount is considered negative because it's money borrowed from the bank, not money you have. Therefore, \( PV = -750 \).
3. Payment (PMT): Kendra is making monthly payments of $[/tex]46.50.
4. Future Value (FV): This represents the balance you want after all payments are made, which is $0 since the loan will be completely paid off.
5. Payments Per Year (P/Y): Kendra is making monthly payments, so there are 12 payments per year.
6. Compounding Periods Per Year (C/Y): Since the interest is compounded monthly, there are 12 compounding periods in a year.
Now, let's evaluate each option to see which one correctly applies these values:
- Option A: Lists P/Y as 1, which is incorrect. It should be 12 for monthly payments.
- Option B: Lists P/Y as 12, which is correct for monthly payments, matches with our calculated monthly interest rate of 0.7%, and uses the correct values for the other parameters.
- Option C: Uses an incorrect interest rate of 0.7, instead of inputting the APR which should be noted as 8.4 and then internally processed as monthly.
- Option D: Appears to have a mix-up with both the interest rate and the future value and present value entries.
Based on this analysis, the correct choice is Option B as it correctly applies all parameters necessary for calculating the number of payments Kendra will need to make to pay off her loan.