A car dealer will sell you a used car for $6,498 with $798 down and payments of $162.51 per month for 48 months. what is the interest rate and the APR?
Accepted Solution
A:
Answer:Interest rate is 1.4% and APR is 16.8%.Step-by-step explanation:Given,The original cost of the car = $ 6,498,Down payment = $ 798,So, the present value of loan, P.V. = original cost - down payment= $ 6,498 - $ 798 = $ 5700,Now, the monthly payment, P = $ 162.51,Number of months, n = 48,Let r be the monthly interest rate,Since, monthly payment formula of a loan,[tex]P=\frac{PV(r)}{1-(1+r)^{-n}}[/tex][tex]162.51=\frac{5700r}{1-(1+r)^{-48}}[/tex]By graphing calculator,[tex]r=0.014= 1.4\%[/tex]Hence, interest rate = 1.4%,And, APR = 12 × 1.4% = 16.8%.