The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic Pumpkin's bank has offered to finance the purchase with an instalment loan, where $155 in interest will be repaid and payments on the loan must be made quarterly. What are the annual interest rates on these loans?

The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic Pumpkin's bank has offered to finance the purchase with an instalment loan, where $155 in interest will be repaid and payments on the loan must be made quarterly. What are the annual interest rates on these loans?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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Calculating the Return On A Loan

Question

The Magic Pumpkin Limousine Company wants to purchase a car telephone system
for one of its automobiles. The telephone vendor has offered to finance the $1,500
purchase over one year in 12 installments, with a total of $140 in interest to be paid
on the loan. Magic Pumpkin's bank has offered to finance the purchase with an
instalment loan, where $155 in interest will be repaid and payments on the loan
must be made quarterly. What are the annual interest rates on these loans?

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