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Recently, Candice Estes was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $28,900 cash or $7,400 at the end of each of 5 years. Compute the effective-interest rate to the nearest percent that Candice would pay if she chooses to make the five annual payments. (Round answer to o decimal places, eg. 7%.) Click view factor tables Interest rate 8

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Answer #1

Interest rate will be 9%

.

Working

Instalment

PV Factor @ 9%

Present Value

$        7,400.00

            0.917431

$        6,788.99

$        7,400.00

            0.841680

$        6,228.43

$        7,400.00

            0.772183

$        5,714.16

$        7,400.00

            0.708425

$        5,242.35

$        7,400.00

            0.649931

$        4,809.49

Total Present value

$      28,783.42

The amount of total present value is little different from $28900 due to round off in interest rate,

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