Ramon Hernandez saw the following advertisement for a used Volkswagen Bug and de

Question

Ramon Hernandez saw the following advertisement for a used Volkswagen Bug and decided to work out the numbers to be sure the ad had no errors. Cash price $8,000 Down payment $0 Annual percentage rate 15.28% Deferred price $11,544.00 or 60 payments at $192.40 per month a. Calculate the amount financed. Amount financed $ 8000 b. Calculate the finance charge. (Do not round intermediate calculations. Round your answer to the nearest cent.) Finance change $ 3544 c. Calculate the APR by formula. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

Explanation / Answer

Formula for loan amortization = A= [i*P*(1+i)^n]/[(1+i)^n-1] Amt $ A = periodical installment                                             192.40 P=Loan amount = ? i= interest rate per period = 15.28% pa                                                       = =15.28/12=1.273 per cent per month n=total no of payments                                                     60 192.40=[0.01273*P*(1.01273)^60]/[(1.01273)^60-1] 192.40=P*0.024 P=8016 approx As Down payment should be equal to loan we can take the loan amount as $ 8,000 Total Amount paid = $                                         11,544 Loan amount $                                           8,000 Finance Charge $                                           3,544 Annual Percentage rate 15.28%. Monthly rate = =15.28/12=1.27 per cent Effective annual Rate =(1+0.1528/12)^12-1 = 16.40% so EAR =16.4% APR =m*(1+EAR)^1/m-1] =12*[(1.1640)^1/12-1] =12*0.012735612 =15.28%

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.