Finance Questions

Question: I Need some Math help?

Wade Ellis buys a new car for $16,113.82. He puts 10% down and obtains a simple interest amortized loan for the balance at 11 and 1/2 % interest for four years. If loan fees included in the Finance Charge total $814.14, find the APR. (Use your graphing calculator. Round the answer to one decimal place.)

Answer: The principal on the car left to be paid off will be 90% of the new car price:
(0.9)(16,113.82) = 14502.44

The total amount Wade will have to repay on the loan will be this principal + the interest on it over a 4-year period + the Finance Charge:
14502.44 + (0.115)(4)(14502.44) + 814.14 = 21987.70

The APR:
21987.70 = 14502.44(1 + i)^4
(21987.70/14502.44)^(1/4) = 1 + i
i = .01096 or 11.0%

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