If I deposit $470 every month, What interest rate I need to earn total interest $4,629 in 63 months? Earned interest are reinvest every month. What's the formula to use for this problem? Thanks.
Background: I just took out a auto loan with APR 6.45%, amount finance $25,066 for 63 months. Monthly payment is $471.35. Total interst is $4629. I'm trying to figure out if I should pay cash for the total amount or if I put that cash in saving account, what kind of rate I need to find to come out ahead taking considering compounding effect.
2007-02-21 03:48:40 · 3 answers · asked by dol1234 1 in Business & Finance ➔ Investing
Thanks for those 2 answers. Could anyone please tell me which one is correct since the formula and results are very different? Thanks again.
2007-02-21 05:25:40 · update #1
If m is the rate earned per month and i is APR:
$4,629 = $470*((1+m)^63-1)/m-470*63
m = 0.004585
i = 1.004585^12 - 1 = 5.6423%
Starla_C is partly right. The problem is you'd have to do that calculation 63 times (one for each monthly payment) and add up the results, and it would compute simple interest instead of compound interest.
You would then calculate the total interest by:
470*(monthly rate)^63+470*(monthly rate)^62+...+470*(monthly rate) = $4629.
You end up with a very messy 63 term polynomial, and a computer could tell you that (monthly rate) = 0.4585% and i = 5.6423%
2007-02-21 04:43:46 · answer #1 · answered by Icey12 2 · 0⤊ 0⤋
Oh dear... I wasn't going to answer this but my sister and I had a similar conversation the other day and the easiest thing we came up with was calling the credit union to ask... or check out the statement... do you get monthly statements? it should say it on there... (my sister didn't, her payments were auto-deducted from her account before she even got her paycheck so we had to call to find out) good luck though... but really? an expedition? gas is nuts... i pay 45 to fill up a 95 accord and i'm quite unhappy with that... to each his own though. good luck and enjoy the truck!! mir :) [edit: k I kinda misunderstood the question... but i think... and it has been YEARS since i've done interest calculations... i don't know the actual percentage interest rate you would be charged cuz it depends also on your credit score and how much you put down apparently also lowers the rate (according to the credit union lady)... for 117 weeks (and i'm basing this off of my conversation w/the credit union lady, not that i'm a genius with compounded interest) i think you'd be better off either putting a few grand down if you can (like 5 even) and take a 10k loan payable in the same amount of time or if you're willing to still make bi-weekly 200 payments, then in half the time... save yourself from some of the interest buddy. at least 4 grand that way.)
2016-05-24 02:36:13 · answer #2 · answered by ? 4 · 0⤊ 0⤋
Interest = Principal x rate x time. That should give you the formula you are looking for.
2007-02-21 03:57:44 · answer #3 · answered by Starla_C 7 · 0⤊ 0⤋