Stan Slickum has a used car that can be bought for $8 comma 500 cash or for a $1 comma 000 down payment and $770 per month fo

Question

3 years ago

6

r 12 months. What is the effective annual interest rate on the monthly payment plan?

1 answer:

Eddi Din [679] · Answer 1 · 2022-04-03T08:03:16+03:00

Answer:

48.8%

Explanation:

We can use the rate formula to determine the monthly rate as follows:

=rate(nper,pmt,-pv,fv)

nper is the number of monthly payments which is 12

pmt is the amount of monthly payment which is $770

pv is the cash price of the minus downpayment i.e $8500-$1000=$7500

fv is the balance after all payments have been made i.e $0

=rate(12,770,-7500,0)=3.37%

effective monthly rate=(1+3.37% )^12-1=48.8%

Stan Slickum has a used car that can be bought for ​$8 comma 500 cash or for a ​$1 comma 000 down payment and ​$770 per month fo