If you take out a loan for a new $20,000 car, a typicalAPR with a fair credit score is 4.8%. If you make monthlypayments of A dollars, find an expression for your debtright after your first payment (remember that there is adifference between the APR and the monthly interestrate).*the first picture is my answer that is needed toanswer the question(20000)(1.048') – A1.048*k=1For any integer n > 1, and any r+ 1, it can be verifiedthatп-1pn1-r – 1-k=0 Using the formula just given, and your previous work,determine the required monthly payment A if you wantto pay off your loan in five years.O $1021.30O $4593.99O $375.60O $884.04O $381.23$4048.13O $370.15

Solution:- We know, Equal monthly installment = { Loan amount x r x [ (1+r)n / (1+r)n -1] where r…

If you take out a loan for a new $20,000 car, a typical APR with a fair credit score is 4.8%. If you make monthly payments of A dollars, find an expression for your debt right after your first payment (remember that there is a difference between the APR and the monthly interest rate).

If you take out a loan for a new $20,000 car, a typical APR with a fair credit score is 4.8%. If you make monthly payments of A dollars, find an expression for your debt right after your first payment (remember that there is a difference between the APR and the monthly interest rate).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

If you take out a loan for a new $20,000 car, a typical
APR with a fair credit score is 4.8%. If you make monthly
payments of A dollars, find an expression for your debt
right after your first payment (remember that there is a
difference between the APR and the monthly interest
rate).
*the first picture is my answer that is needed to
answer the question
(20000)(1.048') – A1.048*
k=1
For any integer n > 1, and any r+ 1, it can be verified
that
п-1
pn
1
-
r – 1
-
k=0

Using the formula just given, and your previous work,
determine the required monthly payment A if you want
to pay off your loan in five years.
O $1021.30
O $4593.99
O $375.60
O $884.04
O $381.23
$4048.13
O $370.15

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