Question

Noel devine bought a new dishwasher for $320. He paid $20 down and made 10 monthly payments of $34. What actual yearly interest rate did noel pay?

Answer 1

Answer:

Step-by-step explanation:

The total amount he will pay from the installments are:

For 10 months = 34 × 10 = 340

The total amount he will have paid will be :

= 340 + 20 = 360

This amount is more by :

360 - 320 = 40

He paid an interest of 40 for the 10 months.

Given that we have that :

A = 360

P = 320

n = 10 months

Let the interest rate be i.By using the compound interest formula we have :

A = P(1 + i)ⁿ

360 = 320(1 + i)^10/12

360/320 = (1 + i)^10/12

(1.125)^12/10 = 1 + i

1.1582 = 1 + i

i = 1.1582 - 1

i = 0.1582

i = 15.82%

= 15.82%