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?

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slicergiza slicergiza · Answer 1 · 2019-08-05T10:33:59+02:00

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%.