Question

Moulton Motors is advertising the following deal on a new Honda​ Civic: ​ "Monthly payments of $400.40 for the next 60 months and this beauty can be​ yours!" The sticker price of the car is $18,000.If you bought the​ car, what interest rate would you be paying in both APR and EAR​ terms? What is the amortization schedule of the first six​ payments? If you bought the​ car, what monthly interest rate would you be​ paying?

Answer 1

1.

APR:=RATE(60,-400.40,18000)*12=12%

EAR=(1+12%/12)^12-1=12.6825%

2.

Payment	Loan beginning balance	Payment	Interest payment	Principal payment	Loan ending balance
1	18000	$400.40	$180.00	$220.40	$17,779.60
2	$17,779.60	$400.40	$177.80	$222.60	$17,557.00
3	$17,557.00	$400.40	$175.57	$224.83	$17,332.17
4	$17,332.17	$400.40	$173.32	$227.08	$17,105.09
5	$17,105.09	$400.40	$171.05	$229.35	$16,875.74
6	$16,875.74	$400.40	$168.76	$231.64	$16,644.10

3.

monthly interest rate is 12%/12=1%