alfamale Registered User

hi can somebody please explain the solution to this question from 2008 paper 1 c. In particular where has the 2.04 come from?

Walter wishes to pay off his loan in equal instalments at the end of the first
and second year. The rate remains at 4% per annum compound interest.
􀀢 How much would he need to repay, at the end of each year, to clear his
loan after two years? Give your answer correct to the nearest cent.


Let the equal instalment be x
P Year 1 = €5000
P Year 2 = €5000 × 1·04 - x = €5200 -x
P Year 3 = (€5200 -x) × 1·04 = x Final payment
(€5200 - x) x 1·04 = x
€5408 - 1.04x = x
€5408 = 2.04x
x = €5408/ 2.04 = €2650.98

brownacid Registered User

x +1.04x = 2.04x

alfamale Registered User

brownacid said:
x +1.04x = 2.04x

That's the bit i don't understand.

gerardo1982 Registered User

As the previous poster said:

x + 1.04x = 2.04x

The x on it's own is the same as 1x.

You could also write it this way:

1x +1.04x = 2.04x

alfamale Registered User

thanks, easy when you know.

gerardo1982 Registered User

It's the same with most things in life, anyway good luck with your studies.

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