Question

A company purchased a new precision metal lathe for $75,600. The company made a down payment of 20% and financed the balance using 36 monthly payments of $2,131.09. Find (a) amount financed. (b) the total installment cost, and (c) the finance charge. (d) Then estimate the APR. Use the formula Approximate APR = The 24 x Finance charge/Amount financed (1 + Total number of payments)

The amount financed is $____(Round to the nearest cent needed.)

Answer 1

The amount financed is $60,480, the total installment cost is $76,719.24, the finance charge is $16,239.24, and the approximate APR is 36.28%.

Step-by-step explanation:

To find the amount financed, we need to calculate the down payment and subtract it from the total cost of the lathe. The down payment is 20% of $75,600, which is $15,120. So the amount financed is $75,600 - $15,120 = $60,480.

To find the total installment cost, we need to multiply the monthly payment by the number of payments. The monthly payment is $2,131.09 and the number of payments is 36, so the total installment cost is $2,131.09 * 36 = $76,719.24.

To find the finance charge, we need to subtract the amount financed from the total installment cost. The finance charge is $76,719.24 - $60,480 = $16,239.24.

To estimate the APR, we can use the given formula: Approximate APR = (24 x Finance charge) / (Amount financed * (1 + Total number of payments)). Plugging in the values, we get Approximate APR = (24 x $16,239.24) / ($60,480 * (1 + 36)). Simplifying this, we get Approximate APR ≈ 0.3628 or 36.28%.