To calculate: The monthly interest rate.
The interest rate is
The annuity formula where A represents the present value of annuity, R represent the payment amount, i is the interest rate per time period and n is the number of payments that will be made.
We seek a solution of , starting from an initial estimate .
For , compute the next approximation by
and so on.
Formula: where s is arc length, r is the radius of the circle and is the central angle.
Law of cosine where a , b , c are sides of triangle .
Payments are to be made every month for 5 years.
Therefore, n =60
Re-placing i by x we get,
Hence, we get
Now, let initial approximation be
The second approximation is .
Following with the iterations after 14 iterations will get the approximate value of x .
Hence , the monthly interest to be pay is :-
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