Answer
$ 12.8\%$
Work Step by Step
(see p. 870)
If a loan $A_{p}$ is to be repaid in
$n$ regular equal payments with
interest rate $i$ per time period,
then the size $R$ of each payment is given by
$R=\displaystyle \frac{iA_{p}}{1-(1+i)^{-n}}$
---------------
(solving with a graphing device/utility)
In the formula for R, we know $A_{p}=12,500,\ n=2(12)=24,$
while i is unknown,
$i=\displaystyle \frac{x}{12}$ , where x is the interest rate.
We treat R as R(x) (a function of x)
$R(x)=\displaystyle \frac{\frac{x}{12}\cdot 12,500}{1-(1+\frac{x}{12})^{-36}}$
We graph this function and
using TRACE or INTERSECT,
find its intersection with the graph of R=420.
Reading from the graph, x=0.128, or $ 12.8\%$
