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Homework Help: Engineering Economics

  1. Nov 29, 2015 #1
    1. Assume monthly car payments of $500 per month for 4 years and an interest rate of 0.75% per month. What initial principal will this repay?

    2. I'm looking for the formula that would be used to calculate it and how to apply it.

    3. My attempt - P*0.075= $500[1-(1+0.075)^(-48) I calculated 48 by 4 years multiply by 12

    My answer is 6459.50. Am I right or somewhere in the ball park? If I am wrong can you explain with what formula should be used?
    Last edited by a moderator: Nov 29, 2015
  2. jcsd
  3. Nov 29, 2015 #2
    I checked your formula, and it is correct, but it should have 0.0075 , rather than 0.075.
  4. Nov 29, 2015 #3
    Here's a check for you initial result: If you make 48 payments of $500, that comes out to $24000. Does it seem reasonable to you that at 9% interest, your original principal would be $6500, and the interest would be $17500?

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