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Math Help - Simple math problem need help to solve

  1. #1
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    Simple math problem need help to solve

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

    1. What is the APR for the credit union?


    2. Use the n-ration formula to confirm the APR on the bank loan.

    3. What is the add-on interest rate for the bank loan?


    4. By how much would Jack lower the APR on the bank loan if he opened an account to avoid the credit check and application fee?
    Last edited by tawaslake; November 9th 2009 at 02:23 PM.
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  2. #2
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    Quote Originally Posted by tawaslake View Post
    Jack Sprater wants to buy a new car. He wants to borrow $18,000 for four or five years. Jack’s credit union offers a simple-interest loan at 9.1% for 48 months, resulting in a monthly payment of $448.78. The credit union does not offer five-year auto loans for amounts under $20,000. If jack borrowed $18,000, this payment would strain his budget.
    A local bank offered him a five-year loan at 9.34% APR, with a monthly payment of $376.62.
    I don't follow...Both 448.78 and 376.62 payments have been calculated
    exactly the same way, including the interest rates compounded monthly.
    So why is "simple-interest" mentioned for one, APR for the other?
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  3. #3
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    Quote Originally Posted by Sir Wilmer View Post
    I don't follow...Both 448.78 and 376.62 payments have been calculated
    exactly the same way, including the interest rates compounded monthly.
    So why is "simple-interest" mentioned for one, APR for the other?
    Why???
    Because it's just another lazy post - that's why.
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  4. #4
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    Sir Jonah, go back in your Royal Cage
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