$22,395.00 ORIGINAL PRICE.$440.00 PER MONTH FOR 72 MONTHS. WHAT IS THE INTEREST RATE.

Guest Mar 2, 2017

#1**0 **

I assume this to be a loan of $22,395 to be paid off in 72 months, or 6 years, at $440 per month. If this is correct, then you have to use this formula to find the interest rate:

PV=P{[1 + R]^N - 1.[1 + R]^-N} R^-1

22,395 =440 x {[1+R]^72 -1 x [1+R]^-72} x R^-1

It turns out that there is no direct solution using logs. However, the computers are programmed to use iterations and interpolation to find the interest rate R.

So, the computer comes out with a rate of: **12.19% compounded monthly.**

Guest Mar 2, 2017