Answer: (D) 5.90%
Explanation: David is going to buy a new car at $21,349.
The down payment is $3,000.
Loan amount (Present value) = $21,349 - $3,000
Loan amount (Present Value) = $18,349
Installment amount (pmt) = $352
As the payment is made monthly (12 months in a year),
Number of payments = 5 * 12
Number of payments = 60
Using the rate option in excel,
[tex] =rate(nper,pmt,-pv,fv,type)
[/tex]
Insert the variables into the option, we get
[tex] =rate(60,352,-18349) [/tex]
By inserting the above formula in excel we get,
Rate = 0.47%
Rate of 0.47% is monthly, to get APR
[tex] APR = (1+monthly rate)^12 - 1 [/tex]
[tex] APR = (1+0.0047)^12 - 1 [/tex]
[tex] APR = (1.0047)^12 -1 [/tex]
[tex] APR = 1.0586 - 1 [/tex]
APR = 0.0586
APR = 5.86% or 5.90%
Therefore the correct option is 5.90%.
