Select the best answer for the question.

David is buying a new car for [tex]$\$[/tex]21,349.00[tex]$. He plans to make a down payment of $[/tex]\[tex]$3,000.00$[/tex]. If he's to make monthly payments of [tex]$\$[/tex]352[tex]$ for the next five years, what APR has he paid?

A. $[/tex]5\%[tex]$
B. $[/tex]0.5\%[tex]$
C. $[/tex]5.9\%[tex]$
D. $[/tex]59\%$

Question

15-07-2024
Mathematics

Answered

Select the best answer for the question.

David is buying a new car for [tex]$\$[/tex]21,349.00[tex]$. He plans to make a down payment of $[/tex]\[tex]$3,000.00$[/tex]. If he's to make monthly payments of [tex]$\$[/tex]352[tex]$ for the next five years, what APR has he paid?

A. $[/tex]5\%[tex]$
B. $[/tex]0.5\%[tex]$
C. $[/tex]5.9\%[tex]$
D. $[/tex]59\%$

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-07-15T12:10:45-04:00

To determine the Annual Percentage Rate (APR) that David is paying for his car loan, we need to find the interest rate that results in the given monthly payments over the specified time period.

Here are the key details of the problem:
- The car price is [tex]$21,349.00. - David makes a down payment of $[/tex]3,000.00.
- The loan amount (principal) is [tex]$21,349.00 - $[/tex]3,000.00 = [tex]$18,349.00. - The monthly payment is $[/tex]352.
- The loan term is 5 years, which amounts to 5 × 12 = 60 months.

Given this information, we seek the APR that makes these monthly payments equivalent to paying off the loan with the calculated principal over the full term.

From our calculations, we find that the correct APR is:
C. 59 %

David is effectively paying an APR of 59% over the life of his car loan based on the given parameters.