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It's time for another financial calculator problem. A UCF student (who has not taken FIN 2100) decides that he really needs a large screen HD TV for football season. The student goes to a "rent to own" center and agrees to rent a TV for $60 per month (end of month). After 36 months, the student will own the TV. Assuming that the student could buy the same TV today for $1,000, what is the interest rate (APR) of renting the TV?

Respuesta :

Answer:

interest rate is 38.68 %

Step-by-step explanation:

Given data

installment = $60

time = 36 months = 36/12 = 3 years

principal = $1000

to find out

interest rate

Solution

we know student pay $60 for 36 months

so he pay total = 60 × 36 = 2160

total amount pay by student = $ 2160

so we can find interest rate by given formula

rate = (1/time)(amount/Principal - 1)

put the value time amount and principal here

rate = (1/3)(2160/1000 - 1)

rate = 0.386667

interest rate is 38.68 %