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 May 16th, 2010, 05:30 PM #1 Senior Member   Joined: Jan 2009 Posts: 345 Thanks: 3 Payment question Suppose you buy a car and take out a loan of $15,000 at 9% annual interest to be paid back over four years. What is the yearly payment you must make to pay off the loan in four equal payments? I get ((.09*15000)/(1-(1.09)^-4)) =$4630.03... could you explain why this wouldn't be the answer?
 May 16th, 2010, 06:48 PM #2 Global Moderator     Joined: Oct 2008 From: London, Ontario, Canada - The Forest City Posts: 7,963 Thanks: 1148 Math Focus: Elementary mathematics and beyond Re: Payment question Given that simple interest is to be applied the yearly payments are (4 * (15000 * .09) + 15000)/4 = $5,100.00. (Could be wrong of course). It depends on how you interpret the question, no? For instance, is the interest charged against the$15,000 each year even though some of this principal will have been paid? Why do you divide by 1 - 1.09^-4 ?

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