Fast Eddie's Used Cars will sell you a 2000 Ford Taurus for $3,000 with no money down. You agree to make weekly payments of $40 for two years, beginning one week after you buy the car. What is
The EAR of this loan?

Question

Quizplus · Accepted Answer

The EAR (Effective Annual Rate) can be calculated using the formula for the interest rate of an annuity. The loan amount is $3,000, with weekly payments of $40 for 104 weeks (2 years). Solving for the interest rate using the annuity formula and converting it to EAR gives approximately 40.94%.

Fast Eddie's Used Cars Will Sell You a 2000 Ford