Results 1 to 7 of 7

Math Help - Annuities - Calculate nominal rate of interest

  1. #1
    Junior Member
    Joined
    Feb 2009
    Posts
    44

    Annuities - Calculate nominal rate of interest

    So I am not sure where to begin on this question.

    A furniture store advertises that you can pay either no tax or no interest. The terms of the no tax option are that no tax will be charged if you pay for your purchase in full on the purchase date. The terms of the no interest option are that you will be charged the 14% tax and pay for your purchase with equal payments at the end of each month for 1 year. Calculate the nominal rate of interest compounded monthly being charged on the "no interest" option.

    Any help guys?
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,102
    Thanks
    68
    Borrowing means $1 becomes $1.14, so 12 payments of .095.
    Rate can only be obtained numerically:
    works out to ~2.075% monthly, or ~24.9% annually
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Junior Member
    Joined
    Feb 2009
    Posts
    44
    Alright thanks. What formula did you use for calculating the interest? My notes aren't up to date for this course. =/
    Last edited by thehollow89; March 13th 2010 at 08:48 AM.
    Follow Math Help Forum on Facebook and Google+

  4. #4
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,102
    Thanks
    68
    Quote Originally Posted by thehollow89 View Post
    What formula did you use for calculating the interest?
    Read my post again: there is NO applicable formula:
    "Rate can only be obtained numerically"

    The interest AMOUNT is simply 14% of amount borrowed (purchase).
    Follow Math Help Forum on Facebook and Google+

  5. #5
    Junior Member
    Joined
    Feb 2009
    Posts
    44
    Quote Originally Posted by Wilmer View Post
    Read my post again: there is NO applicable formula:
    "Rate can only be obtained numerically"

    The interest AMOUNT is simply 14% of amount borrowed (purchase).
    How did you calculate the monthly rate numerically then?
    Follow Math Help Forum on Facebook and Google+

  6. #6
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,102
    Thanks
    68
    I told you I used "iteration": involves computer programming, to "search".

    If you want to learn, google "introduction to iteration".
    Can't "teach" that here.
    Follow Math Help Forum on Facebook and Google+

  7. #7
    Junior Member
    Joined
    Feb 2009
    Posts
    44
    Quote Originally Posted by Wilmer View Post
    I told you I used "iteration": involves computer programming, to "search".

    If you want to learn, google "introduction to iteration".
    Can't "teach" that here.
    You never once mentioned iteration until this post actually. I am unsure what my teacher expects us to do then.
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Financial Maths: Nominal Interest Rate conundrums!
    Posted in the Business Math Forum
    Replies: 1
    Last Post: March 4th 2012, 10:27 AM
  2. Calculate interest rate based on interest in parcels
    Posted in the Business Math Forum
    Replies: 1
    Last Post: February 17th 2011, 09:38 PM
  3. sime annuities / determining the interest rate
    Posted in the Business Math Forum
    Replies: 5
    Last Post: November 4th 2010, 11:46 PM
  4. Need help with interest (Nominal)
    Posted in the Pre-Calculus Forum
    Replies: 3
    Last Post: February 28th 2010, 09:25 AM
  5. Isolate Nominal Interest Rate (GENIUS PLZ!!)
    Posted in the Business Math Forum
    Replies: 4
    Last Post: November 25th 2008, 07:32 AM

Search Tags


/mathhelpforum @mathhelpforum