A businessman wants to buy a truck. The dealer offers to sell the truck for either $120,000 now, or six yearly payments of $25,000. Which of the following is closest to the interest rate being offered by the dealer?

Question

Quizplus · Accepted Answer

The present value of six yearly payments of $25,000 at an interest rate of 7% is approximately equal to $120,000. This suggests that the interest rate being offered by the dealer is closest to 7%.

A Businessman Wants to Buy a Truck