Henry Devine bought a new dishwasher for $320. He paid $20 down and made 10 monthly payments
of $34. What actual yearly interest rate did Henry pay?
A. 29.09
B. 68.75End of exam
C. 14.55
D. 34.38
Please explain to me
Value of loan = $300
let the monthly rate be i
then
34*(1- (1+i)^-10)/i = 300
hard to solve this type of equation but I have some methods and it gave me
i = appr .02343
so the annual rate compounded monthly is 28.1 %
check:
34(1 - 1.02343^-10)/.02343 = = 299.9988 , not bad I would say
None of your choices are valid using proper compound interest formulas
To calculate the actual yearly interest rate Henry paid, we can use the formula for calculating the annual percentage rate (APR):
APR = (Total Interest / Total Amount Financed) * 100
First, let's calculate the Total Interest by subtracting the amount financed from the total amount paid.
Total Interest = Total Amount Paid - Amount Financed
Henry paid $20 down and made 10 monthly payments of $34. So the total amount paid is:
Total Amount Paid = $20 + (10 * $34)
Total Amount Paid = $20 + $340
Total Amount Paid = $360
Now, let's calculate the Amount Financed by subtracting the down payment from the price of the dishwasher.
Amount Financed = Price of Dishwasher - Down Payment
Price of Dishwasher = $320
Down Payment = $20
Amount Financed = $320 - $20
Amount Financed = $300
Next, let's calculate the Total Interest:
Total Interest = $360 - $300
Total Interest = $60
Now we can calculate the APR:
APR = (Total Interest / Amount Financed) * 100
APR = ($60 / $300) * 100
APR = 0.2 * 100
APR = 20
Therefore, the actual yearly interest rate that Henry paid is 20%.
As none of the given options match the calculated APR, it seems there might be an error in the available answer choices.