Question

Henry Devine bought a new dishwasher for $320. He paid $20 down and made 10 monthly payments of $34. What actual yearly interest rate did Henry pay?

Answer 1

Henry paid a total of $360 for the dishwasher:  $20 + (10 x $34) = $20 + $340= $360

Therefore he paid $40 extra which we place over the original amount of the dishwasher:$\frac{40}{320} = \frac{4}{32} = \frac{1}{8}$

Dividing 1 by 8 we get  .125 which, when changed to a percentage becomes 12.5%
Henry paid a yearly interest rate of 12.5%