Question

Jenny bought a new car for $30,000. The loan contract asked her to pay $880 per month for 36 months. What is the APR of the auto loan?

		0.30%
		3.57%
		2.93%
		3.37%

Answer 1

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
30000= $880[ 1-(1+i)^-36 /i]
30000/880 =[ 1-(1+i)^-36 /i]
34.09091 =[ 1-(1+i)^-36 /i]
I =0.297547%
Monthly interest rate = 0.297547%
APR =0.297547%*12
=3.57%