Question

For the car loan described, give the following information. A newspaper advertisement offers a $9,000 car for nothing down and 36 easy monthly payments of $332.50. (a) amount to be paid (b) amount of interest $ (c) interest rate 1 % (d) APR (rounded to the nearest tenth of a percent)

Answer 1

a)

Amount to be paid = $ 332.50 $\times$ 36 months

Amount to be paid = $ 11,970

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b)

Amount of interest = $ 11,970 - $ 9000

Amount of interest = $ 2,970

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c)

The interest rate is found using the following equation

$9000 | S332.50 = 1-(14)

Solving for the value of r in the above equation

Interest rate = 1.63% per month

The interest rate can be be found using the rate function in exel

Bookl - Excel Sign in File Home Insert Page Layout Formulas Data Review View Developer Help Power Pivot Tell me & Share Function Arguments Insert RATE AutoSum 2 Recently Used AT Financial Function Library Function B1 Nper Pmt -B2 PV Bil 1 1 1 B3 = 36 - 332.5 = 9000 = number = number Fv с Type 1 = 0.016307669 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR ДА в Term of 1 the loan 36 Monthly 2 payment $332.50 Present value of 3 the loan $9,000 Monthly interest rate |-B2,B3) Py is the present value the total amount that a series of future payments is worth now. Formula result = 0.016307669 Help on this function OK Cancel

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d)

APR = 1.630767 % $\times$ 12 months

APR = 19.57 %

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