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Homework answers / question archive / You want to buy a new sports coupe for $96,069, and the finance office at the dealership has quoted you a 5
You want to buy a new sports coupe for $96,069, and the finance office at the dealership has quoted you a 5.4 percent APR loan for 77 months to buy the car. What is the effective annual rate on this loan? (round 2 decimal places)
Computation of Effective Annual Rate on this Loan:
Effective Annual Rate = ((1+(i/n))^n)-1
Here,
i = Interest Rate or APR = 5.4%
n = Number of Compounding Periods = 12 months
Effective Annual Rate = ((1+(5.4%/12))^12)-1
= ((1+0.45%)^12)-1
= 1.0554-1
Effective Annual Rate = 0.0554 or 5.54%
