Question

Jim Tree borrowed $1,000 at 10 percent for one year. He paid a $45 processing fee and $100 in interest. He calculated the APR to the nearest tenth. What was the APR?

8.7

9.6

10.6

14.5

Answer 1

The annual percentage rate would be 10.6 in this case!

For example, if your loan has an APR of 10 percent, you would pay $100 per $1000 that you borrow each year. All other things being equal, the loan with the lowest APR is typically least expensive—but it’s usually more complicated than that.