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Using this can you break this down for me in two ...

Sent to Math Experts May 11 09:22 PM

Using this can you break this down for me in two Formulas...When purchasing a new car, what factors do you think are most important when considering a loan?

The overall purchasing price is the most important; alimentally it will determine everything from monthly payments to insurance coverage costs. Price-15,000 36 Months Interest 6.94 payment $463.00 and Price-25,000 36 Months Interest 6.94 Payment $771.00

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May 11 10:01 PM (38 minutes and 6 seconds later)
         

Hi there,

I'm not exactly sure what you are asking in this question.

Are these dollar amounts given?

Are you supposed to use formulas for compound interest / monthly payments?

Thanks,

-Scott



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May 12 3:52 PM (17 hours and 51 minutes and 8 seconds later)
         
supposed to use formulas for compound interest.
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May 12 4:53 PM (1 hour and 1 minute and 18 seconds later)
         
Hi again,

Ok, but it looks like you have given the answers. Was this the complete problem? Did your teacher make up this data? Are you supposed to use the formula for annuities (have you ever heard of that formula)?

Let me know,
Scott

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May 12 6:50 PM (1 hour and 57 minutes and 5 seconds later)
         
No actually I made these up trying to prove the point the the overall purchasing price is the most important!
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May 12 7:04 PM (13 minutes and 35 seconds later)
         
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Ok, have you learned about annuities?

The examples you posted go well beyond just the formulas for compound interest. The formulas for these types of car payments are much more complex (which is fine, if you have learned about it).

Did you use equations to come up with those monthly payments?

-Scott



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Scott -- MIT Graduate -- 100% Positive Feedback on 1147 Math Accepts
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May 12 7:12 PM (7 minutes and 59 seconds later)
         
Reply to Scott's Post: No this: http://autos.yahoo.com/finance/loan-calc/

Put values into this calculator. Can you recreate the same answer with the formulas that you have leaned in this chapter?
Why or why not?

Chapter 5 Mathematics of finance: Finite Mathematics, Eighth Edition, by Margaret L. Lial, Raymond N. Greenwell, and Nathan P. Ritchey. Published by Addison Wesley. Copyright © 2005 by Pearson Education, Inc.
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May 12 7:15 PM (3 minutes and 37 seconds later)
         

Ah ha!

Can you give me an idea of the formulas you have learned?

Have you learned something called the annuity formula?

Thanks,

Scott



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Scott -- MIT Graduate -- 100% Positive Feedback on 1147 Math Accepts
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May 12 7:51 PM (35 minutes and 59 seconds later)
         
Yea you mean this? A sequence of equal payments made at equal periods
of time is called an annuity. If the payments are made at the end of the time
period, and if the frequency of payments is the same as the frequency of compounding,
the annuity is called an ordinary annuity. The time between payments
is the payment period, and the time from the beginning of the first
payment period to the end of the last period is called the term of the annuity. The
future value of the annuity, the final sum on deposit, is defined as the sum of the
compound amounts of all the payments, compounded to the end of the term.
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May 12 8:05 PM (13 minutes and 23 seconds later)
         
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Yup, that's it...

Here's the formula to derive those two payments.

PMT = PV / ((1 - (1 / (1 + i)^n)) / i)

Let's use the formula:

Price-15,000 36 Months Interest 6.94 payment $463.00

PMT = PV / ((1 - (1 / (1 + i)^n)) / i)

PMT = 15000 / ((1-(1/(1+0.0694/12)^36))/(0.0694/12))

= 462.75

Price-25,000 36 Months Interest 6.94 Payment $771.00

PMT = PV / ((1 - (1 / (1 + i)^n)) / i)

PMT = 25000 / ((1-(1/(1+0.0694/12)^36))/(0.0694/12))

= 771.24

Yes, the numbers we get from the equations are in line with the numbers that the site gave us.

Let me know if you have any questions,

Scott



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May 12 8:26 PM (21 minutes and 23 seconds later)
         
You see what MIT will do to you! (way to smart for me) I haven’t seen this formula and with any luck never will!
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May 12 8:42 PM (15 minutes and 45 seconds later)
         
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Scott -- MIT Graduate -- 100% Positive Feedback on 1147 Math Accepts
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May 12 9:06 PM (24 minutes and 41 seconds later)
         
Okay, that didn’t work! Now last question…are there layman's terms for that formula that would work?
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May 12 9:13 PM (6 minutes and 10 seconds later)
         
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