The finance plan includes $150 down, with payments of $113 at the end of each month for 1.5 years.
Determine the annual interest rate being charged, if the interest is compounded monthly.
The selling price is $1894
And show mathematical steps using one or more of these formulas:
compound interest: a = p (1+i) ^ n
present value: pv= a divided by (1+i) ^ n
or the annuity formuals, possibly…
My attempt:
selling price – 150 = 1744
which is the principal value= p
what he payed is the future value, so 113 x (1.5 x 12) = 2034
2034 = 1744 ( 1 + i ) ^ 18
isolated for i
then multiplied i by 12 (compounding periods per year) to get r as the interest rate…
But this was not the correct answer, it is suppose to be 20.6 %
Morningfox
March 31, 2010 at 10:00 pm
I got a monthly rate of 1.67193%. For the annual rate, I get
(1 + 1.67193%)^12 = 1.22015
So the annual rate is 22.015%, compounded monthly.
But also 1.67193% x 12 = 20.06316%, which is the “supposed to be” answer.