Answer: Effective interest rate = 1.36% = 1% rounded of to the nearest percent
Explanation:
Total amount payable = 8880 x 5 = $44400
Price = 41500
FV = P(1 + r)^n
44400 = 41500(1 + r)^5
(1 + r)^5 =44400/41250
[tex]\sqrt[5]{(1 + r)^5}[/tex] = [tex]\sqrt[5]{1.0698795181}[/tex]
1 + r = 1.0136008701
r = 1.0136008701 - 1 = 0.0136008701
Effective interest rate = 1.36% = 1% rounded of to the nearest percent
