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Cassandra is repaying an installment loan of 3,500 with 20 equal payments of 196.00 each.What is the annual percentage rate of the loan?

A. 7.55%
B.11.16%
c 12%
d.13.25%

  • math -

    The question is not worded very clearly.

    Are the payments made monthly?
    Is this a simple interest or compound interest problem?

    None of the rates given as choices verify when considering compound interest

    so assuming this is simple interest,
    interest = 20(196) - 3500 = 420
    rate = 420/((3500)(1))= .12 or 12%

  • math -

    Thank you,I put the question down just like it is in my book,I was confused also.I did come up with 12%,so hopefully it is right.Thanks again!

  • math -

    I = PRT
    R = I/PT

    I = 20(196) - 3500
    I = 3920 - 3500
    I = 420

    T = 20 mo/12
    T = 1.667 yr

    R = I/PT
    R = 420/(3500 * 1.667)
    R = 420/5834.5
    R = .071986
    R = 7.2%

    check
    I = PRT
    I = 3500 x 7.2% x 1.667 yr
    I = 252 x 1.667
    I = 420.084

    I am not a tutor

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