Question

1. You have purchased a used car today at a price of nineteen thousand dollars. You made a down payment of $2,800 and financed the rest by making monthly payments of $272 starting a month from today. Which of the following best describes the terms of your loan?
   1. 6.5% APR for 4 years
   2. 6.5% APR for 5 years
   3. 6.5% APR for 6 years
   4. 6.5% APR for 3 years
   5. 6.5% APR for 7 years

Answer 1

Loan amount =19000-$2800 =16200
We need to find period of loan
Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
16200= $272[ 1-(1+0.005416666667)^-n /0.005416666667]
16200= $272[ 1-(1.005416666667)^-n /0.005416666667]
16200/272 =[ 1-(1.005416666667)^-n /0.005416666667]
n =72 months
that menas = 72/12
=6 years
Correct Option :C.6.5% APR for 6 years