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djchewinggum djchewinggum
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11 months 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?
Textbook 
Business Mathematics in Canada

Business Mathematics in Canada


Edition: 11th
Authors:
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tpriest1tpriest1
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11 months ago
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Anonymous
wrote...
A month ago
Help! The answer is missing an explanation...
wrote...
Educator
3 weeks 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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