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Math Help - silly loan question - driving me nuts!

  1. #1
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    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.
    Attached Thumbnails Attached Thumbnails silly loan question - driving me nuts!-document1-microsoft-word_2012-08-22_12-25-20.png  
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  2. #2
    Senior Member MaxJasper's Avatar
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    Lightbulb 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
    Last edited by MaxJasper; August 21st 2012 at 07:33 PM.
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  3. #3
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    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...
    Last edited by Wilmer; August 22nd 2012 at 04:25 AM.
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  4. #4
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    Re: silly loan question - driving me nuts!

    I'm having a difficult time also calculating auto loan interest. Good thing some of you here did a great help.Thanks anyways. I guess if you want a valid calculation of your car loan rates then maybe asking an expert is better. With a site I found, getting a car loan will actually be really easy for you. The site will ensure you can get the car loan really easily and with hardly any work. It is much better than going to the bank where you may have to wait forever for an answer. How many times have you expected further info about a used or new auto and turned to an internet search on ow to get loan for car? Look no further, all the info you want is located here.
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  5. #5
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    Re: silly loan question - driving me nuts!

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