Question

g A car loan is taken for $14,000 to be paid back in 7 years, with monthly payments of $225. What nominal annual interest rate is being charged in this loan

Answer 1

9%

Step-by-step explanation:

We can use the time value of money techniques to find the the nominal interest rate (r) as follows :

PV = $14,000

N = 7 x 12 = 84

PMT = - $225

P/YR = 12

FV = $ 0

r = ?

thus, using a financial calculator to enter the amounts as above, the nominal annual interest rate compounded monthly is being charged in this loan is 9%.