Question

Amount Financed (m) = $2,500

Number of Payments per year (y) = 12
Number of Payments (n) = 36
Total Interest (c) = $158.15

I = %

Answer 1

I ≈ 4.0248%

Explanation:

The total amount repaid is ...

$2500 +158.15 = $2658.15

so the monthly payment is

$2658.15/(36 mo) = $73.8375/mo

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There is no analytic method by which the interest rate can be calculated, so it must be found by other means, typically by a financial calculator or graphing calculator. The attached shows a graphing calculator result for the interest rate necessary to obtain the above monthly payment, along with a refinement of the result using Newton's Method iteration.

The annual interest rate must be about 4.0248% in order for the total interest on that loan to be $158.15.