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October 26, 2014

October 26, 2014

Posted by **Anonymous** on Saturday, April 12, 2014 at 7:00pm.

- math -
**Reiny**, Saturday, April 12, 2014 at 9:07pmdownpayment = 629.95(.25) = $157.49

amount to be financed = 472.46

The rest of the question sounds like something from the last century.

A very silly way of doing the financing and it misleads the uninformed.

I will assume they will now take 472.46 , add on $60 to get $532.46

then divide that by 12 to get a monthly payment of

$532.46/12 or $44.37

so to find the rate of interest actually charged:

472.46 = 44.37 (1 - (1+i)^-12)/i

10.64773576 i = (1 - (1+i)^-20)

an extremely difficult equation to solve

I will use Wolfram to attempt it.

(had to change the i to x, or else it interpreted i as

√-1 )

I used : 10.6477= (1 - (1+x)^-20)/x

http://www.wolframalpha.com/input/?i=solve+10.6477%3D+%281+-+%281%2Bx%29%5E-20%29%2Fx

and got .06935 as you can see

so the monthly rate is .06935 and the annual rate is .06935(12) = .8322

or 83.22%

( and they burned people at the stake in the middle ages for such practises)

check on my rate

if annual rate is 83.22% , then monthly rate = 6.935% or .06935

let the monthly payment be p

then 472.46 = p( 1 - 1.06935)^-20)/.06935

472.46 = p(10.6477..)

p = 44.37 , (not bad)

I suppose the intent is for the unscrupulous dealer to suggest that the interest is only $60 on $472.46 for 1 year

or 60/472.46 = .12699

or 12.7% interest and telling them it is a lot better than the 18%+ rate that a credit card will charge.

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