How do I calculate the cost of credit figured as a yearly rate?

[Guest]

Total Premium $65156.40, downpayment $16289.10. Amount financed is $48867.30
and the finance charge is $1633.86. The payment amount is $5611.24 and the
term is 9 months. The total of all payments is $50501.16. Does anyone know
how the cost of credit figured as a yearly rate is determined for a scenario
like this.

 

[Guest]

Use

=12*rate(9,-5611.24,48867.3)

 

[vandenberg p]

Hello:

Almost. Since the rate that is computed is for a month to get
the correct annual rate you should use:

=(1+rate(9,-5611.24,48867.3))^12-1

If you want the rate of return on an annual basis.

If you want the government required APR (which ignores
inter-period compounding) then you multiple by 12.

The difference is:
the annual rate of return is 0.082507384
the APR is 0.079542468


Pieter Vandenberg

: Use

: =12*rate(9,-5611.24,48867.3)

: "Hottea11" wrote:

:> Total Premium $65156.40, downpayment $16289.10. Amount financed is $48867.30
:> and the finance charge is $1633.86. The payment amount is $5611.24 and the
:> term is 9 months. The total of all payments is $50501.16. Does anyone know
:> how the cost of credit figured as a yearly rate is determined for a scenario
:> like this.