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TED BORROWED $1,200 FOR TWO YEARS AND HE MADE MONTHLY PAYMENTS. IF THE TOTAL FINANCE CHARGE IS $175.92 WHAT IS THE APR?

Sagot :

Given: Ted Borrowed $1200 for two years and made monthly payments. The total finance charge is $175.92

Required: To determine the Annual Percentage Rate.

Explanation: The formula for APR is as follows-

[tex]APR=\lbrace\frac{(Fees+Interest)}{\frac{Principal}{n}}\frac{}{}\times365\rbrace\times100[/tex]

where n is the total number of days in the loan term.

Here, the total finance charge is $175.92, and the Principal amount is $1200.

Also, n=2 years or 730 days. Substituting these values into the formula as-

[tex]APR=(\frac{175.92}{\frac{1200}{730}}\times365)\times100[/tex]

Further solving as-

[tex]APR=7.29\%[/tex]

Final Answer: The Annual Percentage Rate is 7.29%

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