Paul Carter requests an automobile loan of $15,000 that will be repaid over the next four years in monthly repayments.The First National Bank tells Mr.Carter that his total finance charges will be $4675.20.What is the APR on this loan?

Question

Quizplus · Accepted Answer

To calculate the APR (annual percentage rate) on this loan, we need to use the formula:

Total finance charges = P × (r/12) × (1 + r/12)^n / ((1 + r/12)^n - 1)

where P is the loan amount, r is the APR, and n is the number of months in the loan term.

Plugging in the given values, we get:

$4675.20 = $15,000 × (r/12) × (1 + r/12)^48 / ((1 + r/12)^48 - 1)

Simplifying and solving for r, we get:

r = 0.01373 or 1.373%

Therefore, the APR on this loan is 1.373% or approximately 14%. The correct answer is C.

Paul Carter Requests an Automobile Loan of $15,000 That Will