Question

A newspaper advertisement offers a $4,000 used car for $0 down and 36 easy payments of $141.62, What is the simple interest rate?amount to be paidamount of interestinterest rateAPR

Answer 1

Amount to be paid = $5098.32

Interest = $1,098.32

Interest rate = $366.11 per year

APR = 9.15%

Step-by-step explanation:

We were given the following information:

Principal = $4,000

The total amount paid is given by:

`\begin{gathered} =141.62*36 \\ =5,098.32 \\ =\text{ \$5,098.32} \end{gathered}`

The interest paid is given by:

`\begin{gathered} =5,098.32-4,000 \\ =1,098.32 \\ =\text{ \$1,098.32} \end{gathered}`

The annual interest is given by:

`\begin{gathered} =\frac{interest\text{ paid}}{Duration} \\ Duration=36months=3years \\ =(1,098.32)/(3) \\ =366.1067\approx366.11 \\ =366.11 \\ =\text{ \$366.11 /year} \end{gathered}`

The APR is given by:

`\begin{gathered} =\frac{annual\text{ interest}}{Principal}*100\text{\%} \\ =(366.11)/(4,000)*100\text{\%} \\ =9.15275\approx9.15 \\ =9.15\text{\%} \\ \\ \therefore9.15\text{\%} \end{gathered}`