1) How would I find the APR of a purchase of a car for $35,000 at 2.9% add-on ra
ID: 2783958 • Letter: 1
Question
1) How would I find the APR of a purchase of a car for $35,000 at 2.9% add-on rate for 6 years?
2) How would I find the future value for an account with $5,000 invested at a rate of 7.5% compounded monthly for 11 years?
3) How would I find the cost of the item below in 7 years, assuming an inflation rate of 3%. Movie Admission: $8.00
4) The home that I have purchased costs $126,500 and I pay 10% down. The loan I have obtained is for 30 years at 6.5% interest. How would I find the monthly payment for the home?
Explanation / Answer
1) Monthly payment = 35,000 x (1 + 2.9%) x 6 / (6 x 12) = 570.7
APR can be calculated using I/Y function
N = 6 x 12 = 72, PMT = -570.7, PV = 35,000, FV = 0 => Compute I/Y = 0.45%
=> APR = 0.45% x 12 = 5.43%
2) FV = PV x (1 + r)^n
= 5,000 x (1 + 7.5%/12)^(12*11) = $11,380.15
3) FV = PV x (1 + r)^n
= 8 x (1 + 3%)^7 = $9.84
4) N = 30 x 12 = 360, I/Y = 6.5%/12, PV = 126,500 x 0.9, FV = 0 => Compute PMT = $719.61
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