Question

You have just purchased a car and, to fund the purchase, you borrowed $25,000. If your monthly payments are $402.18 for the next 6 years, what is the APR of the loan? A) 4.58% B) 5.67% C) 4.37% D) 5.09% E) 4.96%

Answer 1

Answer:

E) 4.96%

Explanation:

The computation of the APR could be determined by applying the RATE formula i.e. shown below:

Given that

PMT = $402.18

Present value = $25,000

NPER = 6 × 12 = 72

FUture value = $0

The formula is shown below:

=RATE(NPER;PMT;-PV;FV;TYPE)

After applying the above formula, the annual percentage rate of the loan is

= 0.4135%  × 12

= 4.96%

hence, the correct option is E.