Question

Interest Rate Janet’s payments on her $12,500 car are $420 a month for 3 years. Assuming that interest is compounded monthly, what interest rate is she paying on the car loan?

Answer 1

Janet is paying an interest rate of 4.032% on her car loan.

Step-by-step explanation:

To find the interest rate Janet is paying on the car loan, we can use the formula for calculating the monthly payments on a loan:

1. Divide the monthly payment ($420) by the loan amount ($12,500) to find the monthly interest rate.
2. Convert the monthly interest rate into an annual interest rate by multiplying by 12.
3. Finally, convert the annual interest rate into a percentage.

By following these steps, we can determine that Janet is paying an interest rate of 4.032% on her car loan.