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Homework answers / question archive / You want to borrow $94,000 from your local bank to buy a new sailboat
You want to borrow $94,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,900, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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Computation of Interest Rate using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)*12
Here,
Rate = Interest Rate = ?
Nper = 60
PMT = $1,900
PV = $94,000
FV = 0
Substituting the values in formula:
=rate(60,1900,-94000,0)*12
Rate or Interest Rate = 7.87%
So, highest rate you can afford on a 60-month APR loan is 7.87%.
