Question

You have decided to purchase a car that costs $17,500. You will pay $2,000 down and will finance the rest. You plan on making monthly payments of $400 for 60 months. What is the monthly interest? What is the annual interest rate?

Answer #1

*ANSWER: (there seems to be a word missing as as it
should be monthly interest rate and not monthly interest as monthly
interest will vary every month )*

*Purchase price of car = $17,500*

*money taken on loan = purchase price of house -
downpayment*

*money taken on loan = $17,500 - 2,000 =
$15,500*

*i = ?*

*n = 5 year or 60 months*

*In order to find the monthly payment we will use the
following formula.*

*monthly payment = money taken on
loan(a/p,i,n)*

*400 = 15,500(a/p,i,60)*

*400 = 15,500(a/p,i,60)*

*400 / 15500 = (a/p,i,60)*

*0.025866 = (a/p,i.60)*

*solving for i via trial and error we get i =
1.563%*

*so the monthly interest rate is
1.563%*

*the annual interest rate will be 1.563% * 12 =
18.756%*

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