Question

Summer has an offer to buy an item with a sticker price of $13,200 by paying $460 a month for 36 months. What interest rate is Summer being offered?

Answer 1

the annual interest rate is 7.583%

Explanation:

We are given

Summer has an offer to buy an item with a sticker price of $13,200

so, we have

P=13200

paying $460 a month for 36 months

so, we can find total amount

`A=460* 36`

`A=16560`

Let's assume

annual interest is r

total time =36 months

so, total number of years =3

Since, it is compounded monthly

so, n=12

now, we can use formula

`A=P(1+(r)/(n) )^(nt)`

now, we can plug values

`16560=13200(1+(r)/(12) )^(36)`

now, we can solve solve for r

`(1+(r)/(12) )^(36)=(16560)/(13200)`

`r=0.07583`

So, the annual interest rate is 7.583%