How would one find the monthly payments and EAR? a Gold Bo x t Review a x G trea

Question

How would one find the monthly payments and EAR?

a Gold Bo x t Review a x G treasure: × Buy carc Wholesa/X t chargers x zy 24. Arith X-Syllabus x D AGS 200 x D Module: X Chap 6s x a Amazon. X C Secure https:/./n Chap 6-Sunday-Sep 16th Seved Help Save & Exlt Submit Check my work 9 You want to buy a new sports coupe for $86,500, and the finance office at the dealership has quoted you an APR of 6.8 percent for a 6O month loan to buy the car 10 olnts a. What will your monthly payments be? (Do not round intermediate calculetions and round your answer to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate on this loan? (Do not round intermediate calculetions. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a Monthly payment b. Effective annual rate Pte 9 of 10 Next > Module 1 Task 3..o chapo01pdf Show l X

Explanation / Answer

working:monthly payments = P .r. (1+r)^n / [(1+r)^n -1]

here,

P = $86,500.

r = 6.8% / 12 months =>0.0056666.

n=60 months.

now,

$86,500 * (0.0056666) * (1.005666)^60 / [(1.0056666)^60-1]

=>490.1609* [1.40359431/0.40359431]

=>490.1609*[3.47773563]

=>$1,704.65.

effective annual rate on this loan:

(1+r / 12) ^(12) - 1.................(12 is used since payments are made monthly).

=> (1+ 0.068/12)^(12) - 1

=>(1.0056666)^(12) - 1

=>1.07016 - 1

=>0.07016

=>7.02%

a.monthly payment $1,704.65 b.effective annual rate 7.02%

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