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January 21st, 2013, 02:22 PM | #1 |
Senior Member Joined: Sep 2011 From: New York, NY Posts: 333 Thanks: 0 | Car Payments
Hi, I am stuck on part b of this engineering economics problem. I think I got part a correct. Can anyone give me a hand? Kara borrows $10,000 to purchase a car she must repay the loan in 48 equal end-of-period payments. Interest is calculated at 1.25% per month. Determine the following: a) What are the nominal annual rate and the effective annual rate? Nominal annual rate: effective annual rate: b) What's the amount of Kara's monthly payment? (this is the part I need help with) |
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January 21st, 2013, 10:15 PM | #2 |
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,949 Thanks: 987 | Re: Car Payments
10000 * .0125 / (1 - 1/1.0125^4 ![]() Btw, the lender will tell you while flashing an even row of generous teeth that the rate is 15% annual compounded monthly, but will not add "which is really 16.08% annual" ![]() |
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January 22nd, 2013, 07:05 AM | #3 |
Senior Member Joined: Sep 2011 From: New York, NY Posts: 333 Thanks: 0 | Re: Car Payments
Thank you for the help! Two questions. 1) Is there any chance that "annual" should be looked at as the term of the loan, and I should have used 48 periods instead of 12? 2) Where did you get that formula? |
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January 22nd, 2013, 08:47 AM | #4 | |
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,949 Thanks: 987 | Re: Car Payments Quote:
2) It's the standard "loan payment" formula Go here: http://www.google.ca/#hl=en&sugexp=les% ... 24&bih=571 | |
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January 22nd, 2013, 09:15 AM | #5 |
Senior Member Joined: Sep 2011 From: New York, NY Posts: 333 Thanks: 0 | Re: Car Payments
Got it. I was confused by something the prof said. We were given the formula Which gives |
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January 22nd, 2013, 09:51 AM | #6 | |
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,949 Thanks: 987 | Re: Car Payments Quote:
10,000(1+0.0125)^48 = 18153.548... Has NOTHING to do with loan payments. | |
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January 22nd, 2013, 11:05 AM | #7 |
Senior Member Joined: Sep 2011 From: New York, NY Posts: 333 Thanks: 0 | Re: Car Payments
awesome. I can't thank you enough. You really helped me understand this.
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Thread | Thread Starter | Forum | Replies | Last Post |
Loan outstanding to number of payments made | Russell368 | Economics | 3 | July 7th, 2011 10:50 PM |