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Effective annual interest rate of the loan

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A small manufacturing company is planning to acquire a new drill press. The price on the drill press is $21,100. The seller has indicated that if the company pays cash, there will be a rebate of $2,100. The seller also offers to finance the purchase with 10% down, APR of 3%, with monthly payments over 4 years.

a. If the company finances the machine with the seller, what will be the monthly payment?

b. What is the interest rate per month? What is the effective annual interest rate of the loan?

Reference no: EM132638444

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