Your best friend is negotiating to buy a car He
Your best friend is negotiating to buy a car. He has a small down payment, but needs to borrow the rest. He almost obtained financing from his bank but was turned down due to poor credit. The terms of the loan he wanted involved borrowing $11,591 and repaying it $350 per month for 36 months at an APR of 5.5%. You tell your friend that you'll loan him $11,000 if he signs a promissory note to pay you $350 per month for the next 36 months.
a.) What is your expected return from making this loan?
b.) What is your friend's APR if he accepts your terms?
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