Exam Question: Greedy Mother

DANIEL MEYER ( meyer_d@yahoo.com )
Mon, 18 Jan 1999 13:06:58 -0800 (PST)

I have not been able to arrive at one of the choices
given for the particular question below. Further, a note indicated
that this question could be worked using calculator annuity keys.
Below follows the question:

Iuliana could not qualify for a home mortgage until her car note was
paid in full. She made the following deal with her greedy mother:

Her mother would pay her car note of $8,000 in exchange
for 7 equal monthly payments at the end of each month totaling to
$10,000.

What effective annual interest rate was Iuliana being charged by her
mother?

A) 33%
B) 20%
C) 55%
D) 99%
E) 12%

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