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Home Q & A Board Science-Related Homework Help Mathematics
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djchewinggum djchewinggum
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A year ago
If a used car retailer offers a financing plan on a $10,500 purchase requiring twelve equal monthly payments of $900 including the first payment on the purchase date, what effective rate of interest is being charged on the unpaid balance?
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Business Mathematics in Canada

Business Mathematics in Canada


Edition: 11th
Authors:
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tpriest1tpriest1
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A year ago
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Anonymous
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#2
2 months ago
Help! The answer is missing an explanation...
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#3
Educator
2 months ago
Here's what you do.

First, use Excel and type in this code:

=RATE(12, 900, -10500, , 1)

12 is payments, 900 are the payment amounts, -10,500 is the present value, then leave a space ", ,", then 1 to indicate annuity due.

You get:



Then, take that value and apply this function:

=A5*100*12

Where "A5" happened to be the output for the first function.

This gives:



Finally, convert this to effective annual rate using this technique.



This should help you further
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