A harder 2 unit finance question.. suppose to be easy but.... i cant do it (1 Viewer)

[kooltrainer]

A loan of $P at an interest rate of R per month is repaid over n monthly instalments of $M

a) show that M - (M+P)K^n + P K^(n+1) = 0 where K = 1+R

b) Suppose that i can afford to repay $650 per month on a $20000 loan to be paid back over 3 years. Use these figures in the equation above and apply Newton's method in order to find the highest rate of interest i can afford to meet. Give answers correct to 3 sig figures.


ans = 0.008 per month or 10.5% per annum


i just need help with (b)

 

[vivid]

sub in values:
0 = 650 - 20650(1+R)^36 + 20000(1+R)^37
0 = 13 - 413(1+R)^36 + 400(1+R)^37

f(R) = 13 - 413(1+R)^36 + 400(1+R)^37
f'(R) = -14868(1+R)^35 + 14800(1+R)^36

guess a value for a₀ we can see from f(R) it has to be relatively small ~0.01

a₁ = 0.01 - f(0.01)/f'(0.01)
~ 0.01 - (0.1231)/(113.3282)
~ 0.008913

answers wrong, its closer to 0.009

Actually, you keep manipulating the equation and then use logs to solve it. I don't know if the answer's right or wrong, but I'll assume you're wrong because you've used a substitution where you shouldn't be.

Using one, that is.

 

[vivid]

Oh oops, my bad. I have a tendency never to read questions properly, sozzles.