Forni's Furniture is offering a bedroom suite for $2,700.The credit terms are 60 months at $73.00 per month.What is the interest rate on this offer?

Question

Quizplus · Accepted Answer

The total payment over 60 months is $73 * 60 = $4,380. The interest paid is $4,380 - $2,700 = $1,680. Using the formula for simple interest rate: Interest = Principal * Rate * Time, we rearrange to find Rate = Interest / (Principal * Time). Here, Rate = $1,680 / ($2,700 * 5) = 0.2097 or 20.97%.

Forni's Furniture Is Offering a Bedroom Suite for $2,700