Question

EnglishBusinesses that offer repayment plans for purchases are required by law to disclose the interest rate. But that doesn't mean theygo out of their way to let you know what it is. You have to read all the paperwork. Find the interest rate for the following purchase.To finance a new laptop, Emilie is offered a 5 year payment plan with low monthly payments of $31.30. The cost of the laptop was$884.69 including tax. Round to one decimal place, if necessary.The interest rate is

Answer 1

Based on the problem, here are the given data:

Price of the Laptop = $884.69 including tax.

Monthly Payment = $31.30

Time = 5 years = 60 months

Therefore, by the end of 5 years, Emilie will have paid $1,878.

`\begin{gathered} FutureValue(A)=31.30*60 \\ A=1,878 \end{gathered}`

Therefore, the interest added to the original price is $993.31.

`\begin{gathered} \text{Interest}=A-P \\ \text{Interest}=1,878-884.69 \\ \text{Interest}=993.31 \end{gathered}`

So, (assuming simple interest)

interest = 993.31

Principal = 884.69

time = 5 years

To get the interest rate, we have the formula below:

`r=(I)/(Pt)`

Let's substitute the values that we have to the formula above.

`\begin{gathered} r=(993.31)/((884.69)(5)) \\ r=(993.31)/(4423.45) \\ r=0.22456 \end{gathered}`

Therefore, the interest rate is 22.5%.