A car dealer will sell you a used car for $5,478 with $478 down and payments of $112.08 per month for 60 months. What is the simple interest rate? (Round each answer to the nearest tenth.)
5,478-$478=$5,000
$112.08*60=$6,724.8
$6,724.8-$5,000=$1,724
$1,724/5=344.8
$344.8/$5,000=0.06896= 7.0% is this correct.
Yes, your procedure and answer is correct.
To find the simple interest rate, we need to calculate the total amount paid for the car and then calculate the interest paid over the 60 months.
First, let's calculate the total amount paid for the car. We have the down payment of $478, and then 60 monthly payments of $112.08. To calculate the total amount, we use the formula:
Total amount paid = Down payment + Monthly payments
Total amount paid = $478 + ($112.08 * 60)
Total amount paid = $478 + $6,724.80
Total amount paid = $7,202.80
Now let's calculate the interest paid over the 60 months. The interest can be calculated using the formula:
Interest = Total amount paid - Principal (the initial amount of money borrowed)
Principal = Down payment
Principal = $478
Interest = $7,202.80 - $478
Interest = $6,724.80
To find the simple interest rate, we divide the interest by the principal (down payment) and then divide by the time period (60 months). Finally, we need to multiply the result by 100 to get the interest rate as a percentage.
Simple interest rate = (Interest / Principal) / Time period * 100
Simple interest rate = ($6,724.80 / $478) / 60 * 100
Simple interest rate = 14.02%
Therefore, the simple interest rate for this car loan is approximately 14.0%.