If an automobile is bought for $10,000 from which a $1,100 trade-in is deducted. The annual interest rate charged on the automobile purchase is 25.39%.
What is the Annual interest rate?
Total amount paid:
Total amount paid = $310/mo * 36 months
Total amount paid = $11,160
Principal amount:
Principal amount = $10,000 - $1,100
Principal amount = $8,900
Interest paid:
Interest paid =$11,160 - $8,900
Interest paid = $2,260
Annual interest rate:
Annual interest rate = ($2,260 / $8,900) * 100
Annual interest rate = 25.39%
Therefore the annual interest rate charged on the automobile purchase is approximately 25.39%.