Question

3. John bought a used truck for $4,500. He made an agreement with the dealer to put $1,500 down and make payments of $350 for the next 10 months. The extra cost paid by taking this deal is equivalent to what actual yearly rate of interest?

Answer 1

Answer:

The actual yearly rate of interest paid by John=16.67%

Step-by-step explanation:

Cost price of truck=4,500 dollars

Amount paid  after purchase=1500 dollars

Remaining amount=4,500-15000

                        =3000 dollars

They made an agreement to pay the remaining amount by paying 350 dollars for the next 10 months,so John will pay a total amount of 350×10=3500 dollars

Now as we can note that John is paying an extra amount in the place of 3000 dollars, the extra amount paid by John =3500-3000=500 dollars

This amount of 500 dollars is the interest paid by John

Let the rate of interest be y

y×3000÷100=300

y=16.67

The above value of y is the actual yearly rate of interest paid by John.