Question

You take out an installment loan to purchase a sailplane costing $34,100. You make a down payment of $8,600 and finance the balance by making monthly payments of $1,176.72 for 24 months. Use the APR formula to find the APR.

Answer 1

APR = 10% (Approx.)

Explanation:

Given:

Purchase cost = $34,100

Down payment = $8,600

Monthly payment (pmt) = $1,176.72

Number of month (nper) = 24 months

Find:

APR

Computation:

Present Value (pv) = $34,100 - $8,600

Present Value (pv) = $25,500

Using excel formula

APR = Rate(nper,pmt, pv)

APR = Rate (24, 1,176.72, 25,500)

APR = 0.8335 x 12

APR = 10% (Approx.)