Question

Use the APR table in the Business Math Handbook to estimate the APR for the following installment purchase. You received a $2,000 rebate that brought the price of your car down to $20,000; the financing was for 48 months, and your total interest was $3,279.

Answer 1

7.65%

Explanation:

There are 200 times $100 in $20,000, so the interest amount per $100 is ...

... $3,279/200 = $16.395 per hundred

In the row of the given table corresponding to 48 months, the smallest amount of interest listed is $23.48 per $100. The APR on the loan of concern is clearly less than 10.75%.

A financial calculator says the interest rate on a loan of $20,000 with 48 monthly payments of ($20,000 +3,279)/48 = $484.98 is about 7.65%.