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You want to borrow $69,000 from your local bank to buy a new car. You can...

You want to borrow $69,000 from your local bank to buy a new car. You can afford to make monthly payments of $1,200, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 78 month APR loan? Please show all work and calculations.

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Answer #1

Calculating Interest Rate on Loan,

Using TVM Calculation,

I = [PV = 69,000, PMT = -1,200, FV = 0, N = 78]

I = 0.8175%

Interest Rate = 12(0.008175)

Interest Rate = 9.81%

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