Question

An automaker promotion loan on a $20,000 vehicle. The downpayment is 20% are being financed for 48 months. The monthly payments will be $367.74. What will be the APR for this automobile loan

Answer 1

Answer:

1.52%

Explanation:

Using the formula;

Fees + Interest / Principal / n   X 365

where:

Interest= Total interest paid over life of the loan = 20%

Principal=Loan amount = $20,000

n=Number of days in loan term = 48 months

The APR= $4000 (20% of $20,000) / $20,000 / 48 X 365

​ = 1.52%

Therefore the annual percentage rate is 1.5%.

Answer 2

Answer:

4.92%

Explanation:

The APR for the automobile = $\frac{Finance charge }{amount financed} *100$

Finance charge = Total monthly payments - Amount financed

Amount financed = Cash/loan value - down payment

loan value = $20000

down payment = 20% of $20000 = $4000

therefore Amount financed = $20000 - $4000 = $16000

Total monthly payments = $367.74 * 48 = $17651.52

Finance charge = $17651.52 - $16000 = $1651.52

therefore APR = (1651.52 / 16000) * 100 = 10.32

from the Table look up factor APR having a factor of 10.32 for 48 months installments will be  4.92%