You have found a car at a car lot and in typical fashion are invited into the of
ID: 2654412 • Letter: Y
Question
You have found a car at a car lot and in typical fashion are invited into the office to "work a deal". You know the price of the car is $10,000 (which is what you need to borrow) and the term is 60 months. The salesperson does not tell you the interest rate, but instead says he/she can get you a payment of $199/month. What annual interest rate are you being offered in this loan scenario?
Round to the nearest whole number and entire your answer as a whole number. Assume your first loan payment is due at the end of the month.
Explanation / Answer
Payment per month = $199
No. of months = 60 Months
Total Payment = 199*60 = $11940
Total Interest in 60 Months = 11940-10000 = $1940
Interest per year = 1940/60*12 = $388
Annual Interest Rate = 388/10000*100 = 3.88%
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