Question

I really need some help with this, it's confusing me something fierce. Could you do a step by step if possible, please.

Choose the correct answer.

Mike Morgan has a $83,098.59 loan. He paid $1,000 in fees and $4,900 in total interest the first year. If the APR is the finance charge (interest plus fees) for one year ÷ amount financed, what was the APR for that year?

A) 7.5
B) 7.1
C) 7.3

Answer 1

Total of fees: 1,000 + 4,900 = 5,900

You are told the APR is the total fees divided by the amount financed, so divide the total fees by the amount financed:

5,900 / 83,098.59 = 0.71

0.71 x 100 = 7.1% APR.

The answer is B.