Question

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%

Answer 1

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%

Answer 2

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!

Answer 3

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