Question

Solve.

Betty Buyer purchases a stereo system for $225.00. She pays the store $25.00 down and finances the rest ($200.00). She also agrees to pay $20.00 per month for 12 months.
Her finance charge = $__
APR = __%

Answer 1

Finance charge = $40.00

APR = 20%.

Explanation:

I just did this assignment and can confirm that its correct.

Answer 2

• finance charge: $40
• APR ≈ 35.07%

Explanation:

The amount Buyer pays for the financing is ...

($20/mo)×(12 mo) = $240

Since she is financing $200, her finance charge is ...

$240 -200 = $40

__

The interest this represents on a loan of $200 can be found using a financial calculator or spreadsheet. It is a little more than 2.92% per month. On an annual basis, it is 35.07%.