You want to buy a new sports coupe for $74,400, and the finance office at the de
ID: 2653934 • Letter: Y
Question
You want to buy a new sports coupe for $74,400, and the finance office at the dealership has quoted you a loan with an APR of 6.8 percent for 48 months to buy the car.
What will your monthly payments be? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the effective annual rate on this loan? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
Requirement 1:What will your monthly payments be? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Explanation / Answer
formula for monthly installment: A = P x r(1+r)^n/((1+r)^n-1) Here P = 74400 r = 6.8/(12 x 100) = n=48 Therefore A = 74400 x 0.005667 x 1.005667^48/(1.005667^48-1) Or, A= 74400 x 0.005667 x 1.31158/0.31158 or, A= 74400 x 0.007432/0.31158 Hence, A =1774.71 effective interest rate = (1+r)^12-1 = 7.02% Answer: 7.02%
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