Question

A newspaper advertisement offers a $9000 car for nothing down and 36 easy monthly payments of $317.50 what is a simple interest rate?

Answer 1

From the question, we are provided with the following:

`\begin{gathered} Prin\text{cipal, p= \$9000} \\ Time,\text{ t=36months} \\ The\text{ time must be expressed in years, by dividing by 12months.} \\ \text{Thus, t=}(36)/(12)=3\text{ years} \end{gathered}`
`\begin{gathered} \text{The payments of \$317.50 every month for 36months will amount to:} \\ \text{Amount payable at the end of the tenure(36months)=317.50}*36 \\ \text{Amount, A=\$11,430} \end{gathered}`
`\begin{gathered} \text{Amount}=prin\text{cipal}+\text{interest} \\ 11430=9000+\text{interest} \\ 11430-9000=\text{interest} \\ \text{Interest, I=\$2,430} \end{gathered}`

The simple interest, I, formula is given as:

`\begin{gathered} I=(PRT)/(100) \\ P\colon\text{Principal} \\ R\colon\text{Rate} \\ T\colon\text{Time} \end{gathered}`

Thus,

`\begin{gathered} I=(PRT)/(100) \\ 2430=(9000* R*3)/(100) \\ \text{Cross}-mu\text{ltiply} \\ 27000R=243000 \\ R=(243000)/(27000) \\ R=9\text{\%} \end{gathered}`

Hence, the simple interest rate is 9%