value Do not round Type here to search SolutionPVA P1 1rn

Solution

PVA = P*[{1 - (1+r)^-n} / r]

$71,000 = $1,400[{1 - (1+r)^-66} / r]

To find the interest rate, we need to solve this equation on a financial calculator, using a spreadsheet, orby trial and error. If you use trial and error, remember that increasing the interest rate decreases the PVA,and decreasing the interest rate increases the PVA.

This is the monthly interest rate. To find the APR with a monthly interest rate, we simply multiply themonthly rate by 12, so the APR is:

APR = 0.008264 × 12

APR = 0.0992 or 9.92%