You want to buy a new sports coupe for $75,500, and the finance office at the dealership has quoted you a loan with an APR of 7.9 percent for 72 months to buy the car.
What will your monthly payments be? (Do not round intermediate calculations 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 calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a. monthly payment?
b. effective annual rate percentage?
Present value (PV)= $75,500
Time (N)= 72 months
Interest rate (I/Y)= 7.90%/12= 0.6583% per month
Enter the below in a financial calculator to compute the monthly payment:
Press the CPT key and PMT to compute the monthly payment.
The value obtained is 1,320.08.
Thereby, the monthly payment is $1,320.08.
b.Effective annual rate is calculated using the below formula:
Where r is the interest rate and n is the number of compounding periods in one year.
EAR= (1+0.079/12)^12 - 1
= 1.0819 - 1
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