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  #1  
Old 10-29-2018, 11:47 PM
Siny Siny is offline
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Default Can someone please help with this problem?

Hi all! Here is the problem:

Jeff obtains a mortgage loan of 55,000 to be repaid with monthly payments at the end of each month over n years. Each monthly payment is 500.38, based on a nominal interest rate of i compounded monthly, i > 0. Jeff is unable to make the first payment but makes all the other payments on time. Still, because he skipped the first payment, he owes 3,077.94 at the end of n years. Calculate i.

Why do we need to set the present values equal when we know that the present value is 55,000? In other words, what is the difference between the set up between the 3077.94vj^12n=500.38vj and 55,000 = 500.38 a angle 12n?
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Old 10-29-2018, 11:54 PM
Academic Actuary Academic Actuary is offline
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You have two unknowns so you need two equations.
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Old 10-30-2018, 12:02 AM
Siny Siny is offline
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I do know that, but I am having trouble understanding the concepts of the first equation and the second equation and the difference between the two. I maybe overthinking it T_T
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Old 10-30-2018, 12:10 AM
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I don't know what you mean by what is the difference. One equation relates to a single payment and the other relates to all of the payments.
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Old 10-30-2018, 12:31 AM
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Oh!! That makes sense, I definitely over looked that. I feel so dumb now �� thanks so so so much!
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