What is the add-on interest rate for the bank loan

Reference no: EM13301251

Jack Sprater of Bozeman, Montana, has been shopping for a loan to buy a new car. He wants to borrow $18,000 for four or five years. His credit union offers a simple interest loan at 9.1 percent for 48 months, resulting in a monthly payment of $448.78. The credit union does not offer five-year auto loans under $20,000, however. If he borrowed $18,000, this payment would strain his budget. A local bank offered Hack a five-year loan at a 9.34 percent APR, with a monthly payment of $376.62. This credit would not be a simple interest loan. Because Jack is not a depositor at the bank, he would also be charged a $25 credit check fee and a $45 application fee. Jack likes the lower payment but he knows that the APR is the true cost of credit, so he decided to confirm the APRs for both loans before making his decision.

(a) What is the APR for the credit union loan?

(b) Use the n-ratio formula to confirm the APR on the bank loan.

(d) By how much would Jack lower the APR on the bank loan if he opened an account to avoid the credit check and application fees?

Reference no: EM13301251

Questions Cloud

What is the heaviest vehicle that can be lifted : In a hydraulic lift, the maximum gauge pressure is 15.3 atm. what is the heaviest vehicle that can be lifted

What type of costing does dean foods and stanley works use : What type of costing does dean foods and Stanley Works use , process costing or job-order costing and why?

Evaluate short term liquidity using the ratios : Critically evaluate short term liquidity using the ratios - Discuss the ratio results and not calculate

Calculate the normal force the bottom of the pool : A man of mass 86.5 kg and density 970 kg/m3 stands in a shallow pool with 39.1 % of the volume of his body below water

What is the add-on interest rate for the bank loan : By how much would Jack lower the APR on the bank loan if he opened an account to avoid the credit check and application fees?

Find appropriate cases on the web that you can discuss : In working out your responses to the Discussion Question, you should choose examples from your own experience or find appropriate cases on the Web that you can discuss. Credit will be given for references you make to relevant examples from real compa..

What is the effective annual percentage cost : A firm buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days. What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.)

What is the new degree of operating leverage : If the units sold rise from 8,000 to 8,500, what will be the increase in operating cash flow? What is the new degree of operating leverage?

Walmart acquired massmart to enter the south african market : Recently Walmart acquired Massmart to enter the South African market

User Account

All Pages