Question

Loan amount = $9,500

Monthly payments = $227.50
Time of loan contract = 5 years

True annual interest rate (to the nearest tenth) = _____.

8.4
12.0
17.2
19.2

Answer 1

5x12=60
(227.5x5x120)=13650
13650-9500=4150
apply formula
(2x12x4150)/((13650(60+1))=0.1196
0.1196x100=11.96% 0r 12%

Answer 2

Annual interest rate is 8.4 %

Explanation:

`Net amount =227.5\cdot5\cdot12\\=$13650`

Now for calculating interest rate we use the formula :
`Amount=principle(1+rate\cdot time)\\13650=9500(1+rate\cdot 5)\\rate=0.086\\annual rate = 0.086\cdot100\\rate=8.6 \approx 8.4`

So, annual interest rate = 8.4 %