A car dealer will sell you the $16,650 car of your dreams for $3,290 down and payments of $331.97 per month for 48 months. What is the APR? (Round your answer to the nearest tenth of a percent.)
I keep getting the wrong answer.
I get 26.1
As I gave $3290 for down payment I owe 16650-3290=$13360
If I pay $331.97per month *48 months=$15934.56
So when I owed 13360 I payed 15934.56 so 2574.56 more .If I owed 100 then I would have paid 100*2574.56/13360 more ie 19.3%
Is that OK? Does it make sense to you?
To calculate the APR (Annual Percentage Rate), we need to use the formula:
APR = (Total interest paid / Loan amount) * (12 / Loan term in months) * 100
First, let's calculate the loan amount by subtracting the down payment from the total car price:
Loan amount = $16,650 - $3,290 = $13,360
Next, we need to calculate the total interest paid over the duration of the loan. The total payments can be calculated by multiplying the monthly payment by the number of months:
Total payments = Monthly payment * Loan term = $331.97 * 48 = $15,934.56
To find the total interest paid, we subtract the loan amount from the total payments:
Total interest paid = Total payments - Loan amount = $15,934.56 - $13,360 = $2,574.56
Now we can substitute these values into the APR formula:
APR = ($2,574.56 / $13,360) * (12 / 48) * 100 ≈ 0.193 * 0.25 * 100 ≈ 4.825%
Rounding to the nearest tenth, the APR is approximately 4.8%.