A discount electronics store advertises the following financing arrangement: ""We don’t offer you confusing interest rates. We’l
l just divide your total cost by 10 and you can pay us that amount each month for a year."" The first payment is due on the date of sale and the remaining eleven payments at monthly intervals thereafter. Calculate the effective annual interest rate the store’s customers are paying on their loans.
1 answer:
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Answer:
C $ 57,282.803
Explanation:
We solve for a growing annuity at arithmetic increases of 5,000
a1 = 30,000
d = 5,000
r = 0.10
time = n = 10
PV $298,793.72
Now, we calculate the installment of this which is the equivalent uniform annual cost
PV 298,793.72
time 10
rate 0.14
C $ 57,282.803