The true annual interest rate for this loan is approximately 1.44 or 144%.
The Breakdown
To calculate the true annual interest rate, we can use the formula for calculating the interest rate on a loan:
True Annual Interest Rate = [(Monthly Payment Amount × Number of Payments) / Loan Amount - 1] × 12
Given the information provided:
Loan Amount = $3,000
Number of Payments = 36
Monthly Payment Amount = $93.33
Substituting these values into the formula:
True Annual Interest Rate = [(93.33 × 36) / 3000 - 1] × 12
Calculating this expression:
True Annual Interest Rate = [(3360 / 3000) - 1] × 12
True Annual Interest Rate = (1.12 - 1) × 12
True Annual Interest Rate = 0.12 × 12
True Annual Interest Rate = 1.44
Therefore, the true annual interest rate for this loan is 1.44 or 144%.