Question

You are considering buying a new car. The sticker price is $37,750 and you have $5,000...

You are considering buying a new car. The sticker price is $37,750 and you have $5,000 to put toward a down payment. If you can negotiate a Flat interest rate of 7.5 percent and you wish to pay for the car over a 4-year period. What is the equivalent Annual Percentage Rate on this loan? 8.11% 14.35% 13.51% 15.69% 10.97%

Homework Answers

Answer #1

It is assumed that the loan is repaid in equal monthly payments.

Given, sticker price= $37,750

Down payment= $5,000

Therefore, loan amount (A)= $37,750-$5,000 = $32,750

Interest rate (R ) = 7.5% (flat), Period (Y) =4 years and number of payments (N)= 4*12= 48

Monthly payments= (A+A*R*Y)/N = (32750+32750*0.075*4)/48 = $886.98 (Rounded)

Annual Percentage Rate (APR)= 13.51% (Rounded)

The answer is the third option given.

Calculation using RATE function of Excel as follows:

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are considering buying a new, $15,000 car, and you have $2,000 to put toward a...
You are considering buying a new, $15,000 car, and you have $2,000 to put toward a down payment. If you can negotiate an interest rate of 12% and finance the car over 60 months, what are your monthly car payments?
You are considering buying a new car for $37,000. If you purchase the car you will...
You are considering buying a new car for $37,000. If you purchase the car you will pay $7,000 of the purchase price as a down payment. Below are the two options to choose from. Option 1: Pay off the amount borrowed to purchase the car with a 5 year loan, and the annual percentage rate (APR) will be 0%. Option 2: Receive a $2,000 instant rebate. This will lower your loan amount. Pay off the amount borrowed to purchase the...
2. An auto dealership is advertising that a new car with a sticker price of $19,140...
2. An auto dealership is advertising that a new car with a sticker price of $19,140 is on sale for $16,999 if you pay in cash, or you get a finance for 60 months with a monthly payment of $319. Note that 60 payments × $319 per payment = $19,140, which is the sticker price of the car. By allowing you to pay in a series of payment (starting one month from now) instead of $16,999 in cash, the dealer...
The price of a car you are interested in buying is $93.45k. You negotiate a 6-year...
The price of a car you are interested in buying is $93.45k. You negotiate a 6-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1.23k per month for the following 5 years, with a balloon payment at the end to cover the remaining principal on the loan. The annual percentage rate (APR) on the loan with monthly compounding is 5%. What will be the amount of the balloon...
The price of a car you are interested in buying is $93.82k. You negotiate a 6-year...
The price of a car you are interested in buying is $93.82k. You negotiate a 6-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1.3k per month for the following 5 years, with a balloon payment at the end to cover the remaining principal on the loan. The annual percentage rate (APR) on the loan with monthly compounding is 5%. What will be the amount of the balloon...
An auto dealership is advertising that a new car with a sticker price of $34,848 is...
An auto dealership is advertising that a new car with a sticker price of $34,848 is on sale for $25,995 if payment is made in full, or it can be financed at 0% interest for 72 months with a monthly payment of $484. Note that 72 payments × $484 per payment = $34,848, which is the sticker price of the car. By allowing you to pay for the car in a series of payments (starting one month from now) rather...
The price of a car you are interested in buying is $93.45k. You negotiate a 6-year...
The price of a car you are interested in buying is $93.45k. You negotiate a 6-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1.23k per month for the following 5 years, with a balloon payment at the end to cover the remaining principal on the loan. The annual percentage rate (APR) on the loan with monthly compounding is 5%. What will be the amount of the balloon...
Amal is planning to purchase a car. The sticker price is $35,000. Provincial sales taxes of...
Amal is planning to purchase a car. The sticker price is $35,000. Provincial sales taxes of 15% would apply. Amal has $5,000 to use as a down payment. The bank will charge her 7.75% on her car loan, compounded monthly. She will make monthly loan payments. Part a How much would Amal save if she paid the car off over 4 years instead of 5 years? Part b Assuming she chooses to pay the car off over 5 years, how...
1. You are currently considering buying a new car. The price is $ 15,000 and you...
1. You are currently considering buying a new car. The price is $ 15,000 and you have $ 2,000 for the soon. If you can negotiate a rate of 10% and want to pay for the car in a period of five years. How much would the payment be? 2. Ruiz Motor is financing a new truck with a loan of $ 10,000 to be repaid in five installments of $ 2,504.56 to be made at the end of the...
You have some extra cash this month and you are considering putting it toward your car...
You have some extra cash this month and you are considering putting it toward your car loan. Your interest rate is 7.5%​, your loan payments are $629 per​ month, and you have 36 months left on your loan. If you pay an additional $1,400 with your next regular $629 payment​ (due in one​ month), how much will it reduce the amount of time left to pay off your​ loan? ​(Note: Be careful not to round any intermediate steps less than...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT