The store where you bought new home furnishings offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make monthly payments of $137.41, payable at the end of each month for 3 years. What nominal annual interest rate is built into the monthly payment plan?

The nominal annual interest rate is built into the monthly payment plan is 14.4%

Explanation:

E = P*r * (1 + r) n / ((1 + r) n - 1)

where:

E is the EMI

p is the Principal

r is the nominal rate

n is the number of periods

$137.41 = $4,000*r * (1 + r) 36 / ((1 + r) ^36 - 1)

r = 14.4% P. A

Therefore, The nominal annual interest rate is built into the monthly payment plan is 14.4%