You want to borrow $61,000 from your local bank to buy a new sailboat. You can a

Question

You want to borrow $61,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,000, but no more.

Assuming monthly compounding, what is the highest rate you can afford on a 78-month APR loan? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Assuming monthly compounding, what is the highest rate you can afford on a 78-month APR loan? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Explanation / Answer

P = r*PV/( 1- 1/(1+r)^n)

wher r is the annual rate of interest

PV = monthly installment = 1000 $ ; P = Resent value == 61000$

n = periods = 78

So, plugging all values : P = r*PV/( 1- 1/(1+r)^n)

61000 = 1000*(r/12)/( 1-1/(1+r/12)^78)

732 { 1 -1/(1+ r/12)^78 } = r

We have to solve for r

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