You want to buy a new sports coupe for $75,300, and the finance office at the de

Question

You want to buy a new sports coupe for $75,300, and the finance office at the dealership has quoted you a loan with an APR of 7.7 percent for 36 months to buy the car.

What will your monthly payments be? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places)

What is the effective annual rate on this loan? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations.
Enter your answer as a percent rounded to 2 decimal places )

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

PV = 75300 (indicates the amount of loan)

Rate = 7.7%/12 (indicates monthly rate of interest)

Nper = 36 (indicates the period)

FV = 0 (indicates the future value, if any)

PMT = ? (indicates the amount of monthly payment)

Monthly Payment = PMT(Rate,Nper,PV,FV) = PMT(7.7%/12,36,75300,0) = $2349.22

Answer for Part A is $2349.22.

Part B:

Effective Annual Rate = (1+APR)^1 - 1 = (1+7.7%/12)^12 -1 = 7.98%

Answer for Part B is 7.98%

Thanks.

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