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24 December, 21:52

You want to borrow $38,400 and can afford monthly payments of $960 for 48 months, but no more. assume monthly compounding. what is the highest apr rate you can afford?

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  1. 25 December, 01:51
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    To calculate the APR, we first calculate the monthly rate and then the APR (Annual percentage rate)

    Monthly rate is calculated by using RATE function in excel as in = RATE (NPER, PMT, PV) where

    NPER = number of period in months = 48

    PMT = Monthly payment = 960

    PV = Loan value = 38400

    Monthly rate = RATE (48,960,-38400) = 0.77015%

    APR = Monthly rate * 12

    APR = 0.77015%*12

    APR = 9.24% (Rounded to 2 decimals)
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