Helen is buying a $12,375 car with a $3000 down payment, followed by 36 monthly payments of $325 each. The down payment is aid i

Question

2 years ago

7

Helen is buying a $12,375 car with a $3000 down payment, followed by 36 monthly payments of $325 each. The down payment is aid i

mmediately, and the monthly payments are due at the end of each month. What nominal annual interest rate is Helen paying? What effective interest rate?

Mathematics

1 answer:

jeyben [28] · Answer 1 · 2022-06-22T01:43:44+03:00

Answer:

The nominal annual interest rate is 15%.

The effective interest rate is 16.08%.

Step-by-step explanation:

$9,375 = $325 (P/A, i%, 36)(P/A, i%, 36)

= $9,375/$325= 28.846

From compound interest tables, i = 1.25%

Nominal Interest Rate= 1.25 x 12= 15%

Effective rate = (1+ (0.15/36))^36-1=1.004^36-1= 16.08%