Question

If A college student purchased a used car for $4000. He paid 8% down and then paid 18 monthly payments of $216.79. Determine the APR of the loan to the nearest one-half of a percent.

Answer 1

There is no explicit formula for interest rate, so it must be found by some sort of solver. Here a TI-84 work-alike calculator financial app has been used to find the interest rate (APR) to be 7.5%.

The loan amount is 4000 less 8% of 4000, which is .08*4000 = 320. That is, the loan amount is 4000 -320 = 3680.