Question

It's time for another financial calculator problem. A UCF student (who has not taken FIN 2100) decides that he really needs a large screen HD TV for football season. The student goes to a "rent to own" center and agrees to rent a TV for $60 per month (end of month). After 36 months, the student will own the TV. Assuming that the student could buy the same TV today for $1,000, what is the interest rate (APR) of renting the TV?

a. 51%
b. 43%
c. 33%
d. 23%
e. None of the above

Answer 1

The answer is: E) None of the above

Step-by-step explanation:

Using an excel spreadsheet and the RATE function, we can calculate the monthly interest rate of renting the TV:

=RATE(36,-60,1000)

= 4.94% monthly interest rate

Then we multiply the monthly interest rate by twelve to get the APR:

APR = 4.94% x 12 = 59.3%