You want to buy a new sports coupe for $79,500, and the finance office at the de

Question

You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 6.1 percent for a 72 month loan to buy the car.

What will your monthly payments be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What is the effective annual rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 6.1 percent for a 72 month loan to buy the car.

Explanation / Answer

Effective Annual Rate Formula

effective annual rate = (1+r/m)^m - 1 = 1+ 6.1/12)^12 -1 = 6.273%

(we have assumed interest is charged monthly)

and if interest is charged yearly effective annual rate would be 6.1%

1- using PMT function in excel we can find the amount of monthly payment

=PMT(6.1%,72,79500,0,0) = 4918.74

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