Questions: A car dealer carries out the following calculations. List price 5,368.00 Options 1,625.00 Destination charges 200.00 Subtotal 7,193.00 Tax 431.58 Less trade-in 2,932.00 Amount to be financed 4,692.58 4% interest for 48 months 750.81 Total 5,443.39 MONTHLY PAYMENT 113.40 What is the annual percentage rate? (Round your answer to one decimal place.) 9.6 x %

Solution Steps

The total interest paid over the life of the loan is given as \( \$750.81 \).

The amount to be financed (loan amount) is \( \$4692.58 \).

The loan term is given as 48 months, which can be converted to years: \[ \text{Loan term in years} = \frac{48}{12} = 4.0 \]

The formula for the annual percentage rate (APR) is: \[ \text{APR} = \left( \frac{\text{Total Interest Paid}}{\text{Loan Amount}} \right) \div \text{Loan Term in Years} \times 100 \] Substituting the values: \[ \text{APR} = \left( \frac{750.81}{4692.58} \right) \div 4.0 \times 100 \] Calculating the APR: \[ \text{APR} = \left( 0.160 \right) \div 4.0 \times 100 = 4.0 \]

Final Answer