Business Math Question
posted by Will on .
You borrow $2,600 and repay the loan in 12 monthly installments of $232.
What was the finance charge per $100 of the amount financed?

let the monthly interest rate be i
232( 1  (1+i)^12)/i = 2600
(1  (1+i)^12 )/i = 11.2069
1  (1+i)^12 = 11.2069 i
1  (1+i)^12  11.2069 i = 0
This equation cannot be solved by the usual standard methods.
we can try some values of i
let i = .01
LS = .0004818 , RS = 0 , not a bad guess
let i = .011
LS = .000249 , hey that's even closer, but now it is negative,
So i must be between .01 and .011
do you get the idea?
correct to 5 decimals I got i = .01068
so the monthly charge on $100 is $1.068
Unusual way to state the question, usually it would be stated as an annual interest rate with the stated compound interest period
e.g. in this case:
.01068(12) or 12.816 % interest per annum compounded monthly.