Question

Jorge Holland is having a new furnace installed. The furnace costs $3,500.00. The bank requires a down payment of 20 percent and 36 monthly payments of $85.18 each. What is the APR on his loan?

Answer 1

Down payment = $3,500 x 0.20 = $700.00So the amount of the loan is:Loan amount = $3,500.00 - $700.00 = $2,800.00Now we can use the formula for the present value of an annuity to find the APR:PV = PMT x [(1 - (1 + r)^-n) / r]where PV is the present value (in this case, $2,800.00), PMT is the monthly payment ($85.18), r is the monthly interest rate, and n is the number of months (36).Solving for r, we get:r = 0.01301 or 1.301%Since the monthly interest rate is 1.301%, the APR is:APR = 12 x 1.301% = 15.61%Therefore, the APR on Jorge Holland's loan is 15.61%.