Jones auto sales calculates its ldquo4rdquo nancing as, Ask an Expert

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Jones Auto Sales calculates its “4%” ?nancing as follows. If $3600 is borrowed to be repaid over a 3-year period, the interest charge is ($3600)(0.04)(3 years) = $432. The $432 of interest is deducted from the $3600 loan and the customer has $3168 toward the cost of a car. The customer must repay the loan with 1/36 of $3600, or $100, monthly payments for 36 months. What effective annual interest rate is being charged? Suggestion: Require PW of Cost = PW of Benefits using a P/A equation for 36 months. Use a solver to find the monthly rate, then convert the monthly rate into the effective annual rate.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91918572

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