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Eduardwww
1 month ago
9

When you purchased a car, you borrowed $20,000 from the bank and agreed to make monthly payments of $423.17 for 5 years. What ra

te of interest is the bank charging you
Business
1 answer:
Free_Kalibri [3.1K]1 month ago
6 0

Answer:

4.88%

Explanation:

To determine the interest rate, use the formula:

r=(FV/PV)^(1/n)-1, where

r=interest rate

FV= future value= 423.17*(12*5)=423.17*60=$25,390.2

PV= initial amount= $20,000

n= time periods= 5

Substituting the values into the equation yields:

r=(25,390.2/20,000)^(1/5)-1

r=1.048-1

r=0.0488→4.88%

This indicates that the bank's annual interest rate is 4.88%.

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