You are considering buying a new big screen TV from the BIG Electronics Co.BIG has offered to finance your purchase by extending credit to you.The terms of the credit are 12 easy monthly payments of $95.If you choose to finance this purchase,rather than pay the cash price of $850,what would your annual interest on this loan be?

Question

Quizplus · Accepted Answer

To calculate the annual interest on this loan, we need to find out the total amount paid by the borrower over the 12-month period, and then subtract the original loan amount ($850) from that total. This difference will give us the total interest paid over the year.

12 monthly payments of $95 = $1,140
$1,140 - $850 = $290

Therefore, the borrower paid $290 in interest over the year. To calculate the annual interest rate, we need to divide this amount by the original loan amount of $850 and multiply by 100.

($290 / $850) x 100 = 34.12%

Therefore, the annual interest rate on this loan is 34.12%, or choice C.

You Are Considering Buying a New Big Screen TV from the BIG