You have just purchased a car and, to fund the purchase, you borrowed $27,500. If your monthly payments are $515.27 for the next 5 years, what is the APR of the loan?

The APR is 2.48%

Explanation:

The annual percentage rate is the total amount to be paid yearly to support the purchase of a car. It is given by the formula;

(Fees + Interest/Principal/n *365) * 100

In the given question,

Interest=12.4% or $3416.2

Principal=$27500

Number of days=365*5

=1825

Interest was gotten by multiplying the monthly payment which is $515.27 by 12. The result was then multiplied by 5 to give $30916.2. This is then subtracted from the principal amount.

Therefore we have;

($3416.2 / $27500 / 1825* 365)*100

=2.48%

Note that fees are not usually charged in car loans.

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