Answer:
The true annual interest rate is 15.3%.
Step-by-step explanation:
Given information: Loan amount = $9,500, Monthly payments = $227.50, Time of loan contract = 5 years.
The formula for monthly payment is
[tex]M.P.=\frac{P.V.(\frac{r}{12})}{1-(1+\frac{r}{12})^{12n}}[/tex]
Where, M.P. is monthly payment, P.V. is present value, r is rate of interest, n is number of years.
[tex]227.50=\frac{9500(\frac{r}{12})}{1-(1+\frac{r}{12})^{-12(5)}}[/tex]
Using graphing calculator we get
[tex]r=0.153[/tex]
[tex]r=15.3\%[/tex]
Therefore the true annual interest rate is 15.3%.
