Question

Wesley Mouch's auto loan requires monthly payments and has an effective annual rate of 7.43%. The APR on this auto loan is closest to:

a. 7.19%
b. 7.62%
c. 7.50%
d. 7.43%

Answer 1

The closest option to the APR is d. 7.43%.

Step-by-step explanation:

To find the APR (Annual Percentage Rate) on Wesley Mouch's auto loan, we need to first convert the monthly interest rate (7.43%) to an annual rate.

Step 1: Convert the monthly interest rate to a decimal by dividing it by 100: 7.43/100 = 0.0743.
Step 2: Add 1 to the monthly interest rate as a decimal: 0.0743 + 1 = 1.0743.
Step 3: Raise the result to the power of 12 (since there are 12 months in a year) to get the annual rate: 1.0743^12 = 1.0743^12 = 1.0921.
Step 4: Subtract 1 from the result and multiply by 100 to get the APR as a percentage: (1.0921 - 1) * 100 = 9.21%.

The closest option to the APR is d. 7.43%.