Question

Cri computer Problem 5: You are buying a car. The one you have choosen to purchase is going to cost you $32,985. Your car salesman has told you that you can purchase this vehicle for $525 per month for 72 months. What interest rate will you be paying? Note: For a loan the price is listed Because the bank gives you the money in FV is 0, because the loan will be paid off NPER 1/Y (Rate) PV PMT FV Compounding Periods CPT (Compute) ? Remember, interest rates are ALWAYS stated as yearly rates. See "Compounding More Frequently on the General Information Tab Problem 7: If the cash flows listed below were deposited at 4.1% interest, what would the present value be? NPER Year Am I/Y (Rate) 22 PV 21 31 PMT FV Compounding Periods CPT (Compute)? 23 23 24 25

Answer 1

6)

Calculation of interest rate per annum

Nper	72
I/Y(rate)	4.592%
PV	$32985
PMT	$525
FV	0

formula for present value = A x PVAF_(r%/12,n) where A is monthly payment , r is rate per annum and n is number of years of installments.

32985 = 525 x PVAF_(r%/12,72)

Solving this results in r = 4.592%