Lily wants to buy a new computer which costs 4000$, but does not have enough money to pay for it immediately. Her parents find a store that offers a payment plan that requires an initial payment of 1500$ immediately, and then 2750$ after 1 year.
1)What is the implied yearly interest rate?
2)What is the implied monthly compound interest rate?
I'm an international student and I'm struggling with this type of questions.
I'm doing similar to A-level Maths and I'm not used to these questions. These resemble Economics questions in my curriculum.
4000-1500=2500$ amount of money which is assumed to be "borrowed"
2750-2500=250$ amount of money which is received by the store as interest.
p is the interest rate
p/100 * 2500=250
p=250/2500*100 => p=10% yearly interest rate
Am I doing it right?
..And the second question
Why are they asking about monthly compound interest rate if they specify in the question that she pays the rest after 1 year?
How can I solve this?