The effective annual interest rate paid by charlotte

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Reference no: EM131815066

Charlotte Brakmann purchased a car for $28,000. She wanted to finance the car with the dealer, who claimed the interest rate was “only” 3%. Charlotte wanted to pay off the loan with equal monthly payments over a 3-year period. Her payments were calculated as follows:

Loan Amount $28,000

Credit Check Fee 100

Title Transfer Fee 25

Interest 2,520 = (0.03)(3)($28,000)

Total 30,645

Monthly Payment 851.25 = $30,645/36

What was the effective annual interest rate paid by Charlotte?

Reference no: EM131815066

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