(10 pts) Shady Brian\'s Used Cars advertises a low 6% per year financing deal ov
ID: 2785281 • Letter: #
Question
(10 pts) Shady Brian's Used Cars advertises a low 6% per year financing deal over 24 months. Accordingly, Shady Brian offers the following deal on a lemon-yellow convertible ist pricc Less: Down Payment Balance to finance 5999.00 1500.00 4499.00 Add: Credit Investigation 6% of $4499 (269.94 per year) Total Monthly payment (total/24) 75.00 539.88 5113.88 213.08 Alternatively, Brian will sell you the car for $5250 now. Based on what you have learned from Dr. Leipzig, you realize this means that Shady Brian's deal is asking you to finance $5250 minus your down payment. What actual effective annual interest rate is paid on Shady Brian financing deal? For 5 points extra credit calculate the apparent effective annual interest rate that Brian is trying to trick you into considering.Explanation / Answer
Month Starting Balance Payment Periodic Interest Remaining Balance 1 4,574.00 213.08 41.93 4,402.85 2 4,402.85 213.08 40.36 4,230.13 3 4,230.13 213.08 38.78 4,055.82 4 4,055.82 213.08 37.18 3,879.92 5 3,879.92 213.08 35.57 3,702.41 6 3,702.41 213.08 33.94 3,523.27 7 3,523.27 213.08 32.30 3,342.48 8 3,342.48 213.08 30.64 3,160.04 9 3,160.04 213.08 28.97 2,975.93 10 2,975.93 213.08 27.28 2,790.13 11 2,790.13 213.08 25.58 2,602.63 12 2,602.63 213.08 23.86 2,413.40 13 2,413.40 213.08 22.12 2,222.45 14 2,222.45 213.08 20.37 2,029.74 15 2,029.74 213.08 18.61 1,835.26 16 1,835.26 213.08 16.82 1,639.01 17 1,639.01 213.08 15.02 1,440.95 18 1,440.95 213.08 13.21 1,241.08 19 1,241.08 213.08 11.38 1,039.38 20 1,039.38 213.08 9.53 835.82 21 835.82 213.08 7.66 630.41 22 630.41 213.08 5.78 423.11 23 423.11 213.08 3.88 213.90 24 213.90 213.08 1.96 2.78 Interest Rate by trial & error 11.00% Effective Annual Yield % 11.57%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.