You want to buy a new sports coupe for $84,500, and the finance office at the dealership has quoted you an apr of 5.2 percent for a 60-month loan to buy the car. a. what will your monthly payments be? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) b. what is the effective annual rate on this loan? (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

Ans.  Your monthly payments will be  $1,602.37  ; The effective annual rate is 5.33%

Explanation:

Hi, first, we need to convert this APR rate into an effective monthly rate, that is, dividing 0.052/12 =0.00433 (or 0.4333%). Then we need to use the following equation and solve for A.

Where:

PresentValue= 84,500

A = periodic payments (the monthly payments that you need to make)

r = 0.004333333

n=60 months

So, let´s solve for A.

Now, in order to find the effective annual rate, we need to use the following equation.

Notice that to find an effective rate you have to start with another effective rate, otherwise it won´t work. So everything should look like this.

Meaning that the equivalent effective annual rate to 5.2% APR is 5.33% effective annual.

Best of luck.

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