Rounding the number of payments!

[Omarrr_2163]

This is Q9 from the VCAA Sample Exam 2 of Finance. When finding the number of repayments, I'm not sure if it is 18 or 19... Because when I use the financial solver, it gives me 18.26. Would that be 18 or 19 payments? But when I looked at the answers on iTute, they used the compound interest rule instead of the financial solver and they got 19.114 and then said 19 repayments. So can you check which is right?
And when rounding off on the repayments? If it is 18.17, for example, would it be 18 and if it was 18.76 would it still be 18 or would it be 19?

Thanks.

[VeryJuicyLemon]

Correct answer is 18, itute formula is not accurate. Stick with financial solver for question like these.

[vceme]

Pretty sure because VCAA states to round off to the nearest whole number, you got to 18 as the correct answer is
18.76 --> 19 because its higher than 5

[Omarrr_2163]

Correct answer is 18, itute formula is not accurate. Stick with financial solver for question like these.

Yeah I thought so, thanks!

Pretty sure because VCAA states to round off to the nearest whole number, you got to 18 as the correct answer is
18.76 --> 19 because its higher than 5

Can you confirm this because there have been several questions I've done whereby 17.99 years would be rounded to 17 years in payments. Its so frickeennn confusing because I don't want to a mark just for not knowing whether to round up or down on payments.

[Lear]

Where have you seen 17.99 being rounded to 17?

[VeryJuicyLemon]

Can you confirm this because there have been several questions I've done whereby 17.99 years would be rounded to 17 years in payments. Its so frickeennn confusing because I don't want to a mark just for not knowing whether to round up or down on payments.

The only scenario that I could think of when this happens is when vcaa asks for how many EQUAL payments of x amount. This is the case since majority of the final payment differs from the equal payments therefore won't be included.

[studyingg]

This is Q9 from the VCAA Sample Exam 2 of Finance. When finding the number of repayments, I'm not sure if it is 18 or 19... Because when I use the financial solver, it gives me 18.26. Would that be 18 or 19 payments? But when I looked at the answers on iTute, they used the compound interest rule instead of the financial solver and they got 19.114 and then said 19 repayments. So can you check which is right?
And when rounding off on the repayments? If it is 18.17, for example, would it be 18 and if it was 18.76 would it still be 18 or would it be 19?

Thanks.

It would still be 19 despite getting 18.26 on a financial solver because it wouldn't be paid off fully after 18 payments. I asked my teacher, and he went and talked to all of the FM teachers at my school (most are examiners) and they agreed it would be 19

[VeryJuicyLemon]

It would still be 19 despite getting 18.26 on a financial solver because it wouldn't be paid off fully after 18 payments. I asked my teacher, and he went and talked to all of the FM teachers at my school (most are examiners) and they agreed it would be 19

Since vcaa told you to round to nearest whole number, you should definitely round to 18. I only see it be 19 if vcaa ask you "how many months' (with no specification of rounding) in which 18.26 months is invalid as payment is paid monthly therefore can only be fully paid in the 19th month

[studyingg]

Since vcaa told you to round to nearest whole number, you should definitely round to 18. I only see it be 19 if vcaa ask you "how many months' (with no specification of rounding) in which 18.26 months is invalid as payment is paid monthly therefore can only be fully paid in the 19th month

VCAA is asking you for the number of payments required to fully repay the loan to the nearest whole number, the reason they include the 'whole number clause' is to prevent students from writing 18.26 (because there is no 18.26th) payment. After the 18th payment the loan will not be fully paid off, hence the next payment where this is possible is the 19th one

if you think of how this would be plotted on a graph it makes a bit more sense, the 19th payment is the nearest payment where the loan is fully paid off.

[VeryJuicyLemon]

VCAA is asking you for the number of payments required to fully repay the loan to the nearest whole number, the reason they include the 'whole number clause' is to prevent students from writing 18.26 (because there is no 18.26th) payment. After the 18th payment the loan will not be fully paid off, hence the next payment were this is possible is the 19th one

if you think of how this would be plotted on a graph it makes a bit more sense, the 19th payment is the nearest payment where the loan is fully paid off.

I honestly still think it is 18. I understand where you are coming from but if VCAA wants to prevent students to write 18.26 then 'nearest' shouldn't be included in the question (Just by asking how many months, in which months or after how many months etc or give your answer in whole numbers). It can be the same thing as payments when VCAA ask you to find monthly payments and round it to nearest cent or dollar, so what if you round it down? Wouldn't that also be inaccurate from what you said? Rounded answer never was suppose to be accurate.

But this question however is somewhat dodgy. I found 3 sources, 1 of them said 18 the other 19 and the last one didn't even bother giving an answer to the question but did so to the rest.

[studyingg]

I honestly still think it is 18. I understand where you are coming from but if VCAA wants to prevent students to write 18.26 then 'nearest' shouldn't be included in the question (Just by asking how many months, in which months or after how many months etc or give your answer in whole numbers). It can be the same thing as payments when VCAA ask you to find monthly payments and round it to nearest cent or dollar, so what if you round it down? Wouldn't that also be inaccurate from what you said? Rounded answer never was suppose to be accurate.

But this question however is somewhat dodgy. I found 3 sources, 1 of them said 18 the other 19 and the last one didn't even bother giving an answer to the question but did so to the rest.

MAV is quite a credible source imo, and they said 19, and I don't expect you to trust this, but my teacher is legit an examiner, and we discussed this question, and i'm fairly certian it is 19. The 'nearest' thing does not matter in this instance, because the 18.26th payment, just as the 18.99th payment do not exist based on the context of this question and the scope of the FM study design. Hopefully it wont be this ambiguous on the exam, as ik there is a lot of debate on this. The way you are interpreting it, however,  is flawed because you are assuming 18.26 is close to 18 therefore 18 is the answer, but in doing this you are validating the existence of an 18.26th payment when in fact there are only two payments of interest the 18th (where  the loan is not fully paid off) and the 19th. I would completly agree with you if it said how many equal payments will hugo make, as in that case there would be 18 equalpayments and a final smaller payment.

[VeryJuicyLemon]

MAV is quite a credible source imo, and they said 19, and I don't expect you to trust this, but my teacher is legit an examiner, and we discussed this question, and i'm fairly certian it is 19. The 'nearest' thing does not matter in this instance, because the 18.26th payment, just as the 18.99th payment do not exist based on the context of this question and the scope of the FM study design. Hopefully it wont be this ambiguous on the exam, as ik there is a lot of debate on this. The way you are interpreting it, however,  is flawed because you are assuming 18.26 is close to 18 therefore 18 is the answer, but in doing this you are validating the existence of an 18.26th payment when in fact there are only two payments of interest the 18th (where  the loan is not fully paid off) and the 19th. I would completly agree with you if it said how many equal payments will hugo make, as in that case there would be 18 equalpayments and a final smaller payment.

After going through past years examination, I encountered 2 question similar to this from VCAA. However both of them end up being .5 and .95 therefore nearest is rounded up. As of right now, as long as VCAA doesn't give an answer on what happens if it end up being .26, whether you round it up or down in nearest month rounding questions. We can never know. So lets hope it isn't in the exams.

Also i wouldn't say MAV as a credible source after they rounded numbers before giving the final answer during financial solver which VCAA has stated this is wrong. Big headache right there last night when I was doing that question

[S_R_K]

The way you are interpreting it, however,  is flawed because you are assuming 18.26 is close to 18 therefore 18 is the answer, but in doing this you are validating the existence of an 18.26th payment when in fact there are only two payments of interest the 18th (where  the loan is not fully paid off) and the 19th.

I don't think that rounding down implies that there is an 18.26th payment.

If the value is 18.26, and VCAA asks you to round to the nearest whole number, then the correct final answer is 18.

It is true that 18 equally sized payments will not pay off the loan. But rounding 18.26 down to 18 does not imply that 18 equally sized payments fully pays off the loan.

There is nothing strange about rounding down here either. Imagine someone wanting to know how long it will take to pay off the loan. If they are told that it will take 18.26 payments, then their response might be to increase the value of their final payment to pay off the loan in 18 payments, rather than accrue a little bit of extra interest and pay off the loan in 19 payments.

[Lear]

Having done most of the VCAA further exams I have not found this particular issue of having to round down where payments are, say, 9.26.
One has to remember that VCAA exams go through proper vetting to ensure their is no ambiguity in questions. There are teachers who quite literally sit these exams to ensure they are fine.
I would not be surprised if VCAA actively ensures the payment number is 9.x where x is greater than 50 in order to have both those that round and those that take the logical approach on rounding are correct.

[studyingg]

I found an example from 2012 VCAA  It does not say 'to the nearest whole number', but I think this still holds as evidence to confirm that it's 19 hehe