Max Dunbar bought a used BMW for 20500 on wwwAutotradercom H

Max Dunbar bought a used BMW for $20,500 on www.Autotrader.com. His down payment was $6,000. He paid off the balance with monthly payments of $311 for 5 years. Find the APR.

Solution

Solution:

$20500=$6000+$311 * PVAF(r,60)

$20500=$6000+$311 * {[1/(1+r)ⁿ]-1}/ r

$20500-$6000 = $311 * {[1/(1+r)⁶⁰]-1/r

$14500 = $311 * {[1/(1+r)⁶⁰] -1} / r

$14500/$311 = {[1/(1+r)⁶⁰] -1}/r

$46.6237 = {[1/(1+r)⁶⁰] -1} /r

R = .00833

R= .833% pm