Question

You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 5.8 percent for a 60-month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?

Cost of Car: 79,500 (D6)
Discount Rate: 5.8% (D7)
# of years: 5 years (D8)
# of times compounded per year: 12 (D9)
payment:_____
Effective Interest rate:____
Note: The question is asking to solve the payment and interest rates with excel formulas, how the excel book refers to the numbers is in parenthesis to the right of the numbers.

Answer 1

The monthly payment and effective annual rate for a $79,500 car loan at 5.8% APR over 60 months can be calculated using specific Excel formulas that account for the terms of the loan and compounding interest.

Step-by-step explanation:

To calculate the monthly payment for a $79,500 car loan with a 5.8% annual percentage rate (APR) over a 60-month period, you can use the Excel formula PMT(D7/12, D8*12, -D6). The negative sign before the loan amount (D6) is used to indicate a cash outflow. The effective annual rate (EAR) can be calculated with the formula (1 + D7/D9)^(D9) - 1, which accounts for the compounding periods per year.

Example:

The monthly payment: =PMT(5.8%/12, 5*12, -79500)
The effective annual rate: =(1 + 5.8%/12)^(12) - 1