Question

You want to borrow $85,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,450, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 72-month APR loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

7.02% per annum

Explanation:

The computation of the highest rate is shown below;

Given that

Present value be $85,000

PMT is $1,450

NPER is 72

Future value be $0

The formula is

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

After applying the above formula, the rate should be 0.59% per month

Annually, it should be

= 0.59% × 12 months

= 7.02% per annum