Cash price of a cooker is 9000.acustomer bought by paying 15 monthly installments of 950 each calculate the rate compund intrest
To calculate the compound interest rate, we need the formula:
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (the initial cash price)
r = the annual interest rate (unknown)
n = the number of times that interest is compounded per year (assuming it's compounded annually)
t = the number of years the money is invested for (15 months/12 months/year = 1.25 years)
We can rearrange the formula to solve for r:
r = ( (A/P)^(1/(nt)) - 1) * n
Now let's plug in the given values:
P = 9000 (the cash price)
A = 950 * 15 (the total amount paid after 15 installments)
n = 1 (compounded annually)
t = 15/12 = 1.25 years
A = 950 * 15 = 14250
r = ((14250 / 9000)^(1/(1.25*1)) - 1) * 1
= (1.5833^(1/1.25) - 1) * 1
= (1.2679 - 1) * 1
= 0.2679
Therefore, the compound interest rate is approximately 26.79%.