Question

Ella has an offer to buy an item with a sticker price of $12,300 by paying $420 a month for 36 months. What interest rate is Ella being offered?

Answer 1

Ella is being offered an interest rate of approximately 122.95%.

Step-by-step explanation:

To calculate the interest rate, we can use the formula:

Interest = (Monthly Payment * Number of Payments - Sticker Price) / Sticker Price

Plugging in the given values:

Interest = ($420 * 36 - $12,300) / $12,300

Simplifying this expression gives:

Interest = $15,120 / $12,300

Dividing these two numbers gives:

Interest ≈ 1.2295

To convert this decimal to a percentage, we multiply it by 100:

Interest ≈ 122.95%

Therefore, Ella is being offered an interest rate of approximately 122.95%.