Which formula should I use?

[lucky090]

If you buy a computer directly from the manufacturer for $2500 and agree to repay it in 48 equal installments at 1.25% interest per month on the unpaid balance, how much are your monthly payments?

Am I suppose to use present value, future value, compound interest, or simple interest formula?

 

[soroban]

Hello, lucky090!

You buy a computer $2500 and agree to repay it in 48 equal monthly installments
at 1.25% interest per month on the unpaid balance. .What are your monthly payments?

You must use the Amortization Formula:. . \(\displaystyle A \:=\\cdot\dfrac{i(1+i)^n}{(1+i)^n-1}\)
where: .\(\displaystyle \begin{Bmatrix}A &=& \text{periodic payment} \\ P &=& \text{principal borrowed} \\ i &=& \text{periodic interest rate} \\ n &=& \text{number of periods}\end{Bmatrix} \)


You have: .\(\displaystyle \begin{Bmatrix}P &=& 2400 \\ i &=& 0.0125 \\ n &=& 48\end{Bmatrix}\)

Go for it!