(2055.99-400)(1 + .075)^2 / 12 = 159.48
(2055.99-400)(1 + r) = 12*180
r = 30.4%
Nathaniel wants to buy a new bicycle. His payment options are:
Option 1: Pay $2055.99 cash. He only has $400.00 saved up, so he can take out a loan for the rest from his bank at a rate of 7.25% per annum over 2 years.
Option 2: Take the store payment plan of 12 monthly payments of $180.00.
a) If he chooses Option 1, what will his monthly payments be?
b) If he chooses Option 2, what annual rate of interest will he pay? (in percentage)
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