Final answer:
To find the interest rate John is paying for the stereo system, we can use the formula for monthly loan payments and solve for the interest rate. By rearranging the formula and solving, we find that John is paying an interest rate of approximately 1.97% per month.
Step-by-step explanation:
To find the interest rate John is paying, we can use the formula for the monthly payment of a loan:
)Monthly Payment = P * r * (1 + r)^n / ((1 + r)^n - 1)
Where P is the principal amount, r is the monthly interest rate, and n is the total number of payments. In this case, P = $640, n = 2*12 = 24, and the monthly payment is $32. We can rearrange the formula to solve for r:
32 = 640 * r * (1 + r)^24 / ((1 + r)^24 - 1
By trial and error or using a numerical method, we find that the monthly interest rate, r, is approximately 0.0197, or 1.97% when rounded to the nearest hundredth.