Question

Recently, Glenda Estes was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $27,600 cash or $6,900 at the end of each of 5 years. Compute the effective-interest rate to the nearest percent that Glenda would pay if she chooses to make the five annual payments.

Answer 1

The rate of interest charged to Glenda would be 5.18% upon the payment of her car in five annual installments.

What is a rate of interest?

The percentage of interest charged over the principal amount of loan or advances for a particular period of time, is known as the rate of interest of such loan.

The computation of rate of interest using the formula and given information will be,

$\rm Rate\ of\ Interest= \dfrac{Interest}{Principal\ x\ Time}\ x\ 100\\\\\rm Rate\ of\ Interest= \dfrac{7150}{138000}\ x\ 100\\\\\rm Rate\ of\ Interest= 5.18$

Hence, the computation of the rate of interest is as aforementioned.

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