# Math Help - silly loan question - driving me nuts!

1. ## silly loan question - driving me nuts!

Colin buys a new car worth $25,000. He pays a 10% deposit (i.e$2500) and agrees to pay $500 at the end of each month for as long as necessary. If interest is at 14% pa effective, find: 1. the number of payments of$500 requires
2. the amount of the final smaller payment required one month after the last full payment of $500 3. the loan outstanding after 2 years using both the retrospective and prospective methods please see the attached working out for part 1, the answer is 62 but i am confused on how to get to that. 2. ## Re: silly loan question - driving me nuts! i_effective=14% (compounded monthly) ==> i_nominal = 13.17% compounded monthly. Use Pv=$25000-$2500=$22500, i=13.17%, pmt=$500, Fv=$0 ==> n=62.4 months
Use n=62 months, pmt=$500, Pv=$22500, i=13.17% ==> Fv=$196.99 to be paid 1 month after the last$500 at n=63

Pv=Present value
Fv=Future value

3. ## Re: silly loan question - driving me nuts!

Where does your thumbnail solution come from?
Completely wrong...your teacher drank a 40-ouncer of Canadian Club?
84 * 500 = $42,000 : would you pay that back after getting$22,500?!
Max gave you correct solution...

4. ## Re: silly loan question - driving me nuts!

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5. ## Re: silly loan question - driving me nuts!

Are you a loan officer...drumming up business?