You want to borrow $52,700 and can afford monthly payments of $1.041 for 60 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford?
a. 6.90 percent
b. 5.58 percent
c. 7.34 percent
d. 8.87 percent
e. 9.50 percent

Calculating the interest rate from other loan parameters is an iterative process. Fortunately, many spreadsheets and financial calculators can do that for you. The one shown in the attachment calculates the rate to be ...

APR = 6.90% . . . . . choice A

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Additional comment

Another way to solve this problem is to compute the payment for each of the answer choices. This is shown in the second attachment. The rate that results in a payment of $1041 is 6.90%.

You want to borrow $52,700 and can afford monthly payments of $1.041 for 60 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford? a. 6.90 percent b. 5.58 percent c. 7.34 percent d. 8.87 percent e. 9.50 percent

Respuesta :

APR

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You want to borrow $52,700 and can afford monthly payments of $1.041 for 60 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford?
a. 6.90 percent
b. 5.58 percent
c. 7.34 percent
d. 8.87 percent
e. 9.50 percent