Reconsider the car loan in the previous question. What if the payments are made in four annual year-end installments? What annual payment would have the same present value as the monthly payment you calculated? Use the same effective annual interest rate as in the previous question. Why is your answer not simply 12 times the monthly payment?

Previous Problem

If you take out an $8,000 car loan that calls for 48 monthly payments of

$225 each, what is the APR of the loan? What is the effective annual interest rate on the loan?