The Phi Nancy Company will lend you $20,000 for your new car purchase. Phi Nancy requires...
The Phi Nancy Company will lend you $20,000 for your new car purchase. Phi Nancy requires that you pay that load back in monthly payments of $950 cash, for a total of thirty-six monthly payments.
What is the annual percentage rate (APR) and the effective annual rate (EAT) that Phi Nancy require on this loan?
Homework Answers
Given,
Loan amount (PV) = $ 20,000
Number of periods(nper) = 36
Monthly amount(PMT) = 950
Rate(rate) = ![=RATE(36,-950,20000 RATE(nper, pmt, pv, [fv], [type].](http://img.homeworklib.com/questions/1cd049b0-2df6-11ea-a139-bd83b6ac94e5.png?x-oss-process=image/resize,w_560)
= 3.25%
per month
Annual Percentage Rate = 3.25% * 12 = 38.95% pa
EAR = (1+ APR/12)^12 -1 ( assuming that the interest rate is compounded monthly)
EAR = (1+ 38.95%/12)^12 - 1 = 46.72%
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