Answer:
Option 2 - The interest rate is 13.7.
Step-by-step explanation:
Given : Amount Financed (m) = $1,400, Number of Payments per year (y) = 12 Number of Payments (n) = 24, Total Interest (c) = $200.50.
To find : The value of I?
Solution :
The formula used is
[tex]c=\frac{m\times I\times (n+1)}{t\times y\times 100}[/tex]
Where,
Total Interest (c) = $200.50
Amount Financed (m) = $1,400
Number of Payments per year (y) = 12
Number of Payments (n) = 24
Number of years (t)=2 (as n=24 is payment monthly)
Substitute all values in the formula,
[tex]200.50=\frac{1400\times I\times (24+1)}{2\times 12\times 100}[/tex]
[tex]I=\frac{200.50\times 2\times 12\times 100}{1400\times 25}[/tex]
[tex]I=\frac{481200}{35000}[/tex]
[tex]I=13.7[/tex]
Therefore, The interest rate is 13.7.
So, Option 2 is correct.
