Question

Stacy Smith has a $50,000 loan with a 10% annual interest rate. She paid $250 for a credit report, $300 for attorneys, $250 for appraisal fees, and $5,268 in total interest for 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?

Answer 1

(250+300+250+5,268)÷50,000
=0.12136*100=12.1%

Answer 2

APR = 12.14%

Explanation:

(250+300+250+5,268)÷50,000

Amount paid for a credit report = $250

Amount paid for the attorneys = $300

Amount paid for the appraisal fees = $250

So, Total fees for one year = 250 + 300 + 250

⇒ Total fees for one year = $800

Total interest for one year = $5268

So, Total finance charge for one year = Total fees + Total interest

⇒ Finance Charge = 800 + 5268

⇒ Finance Charge = $6068

Amount financed for the loan = $50000

`\text{Annual Principal Rate (APR) = }\frac{\text{Finance charge}}{\text{Amount financed}}* 100\\\\\implies APR = (6068)/(50000) * 100\\\\\implies APR =12.136\\\\\implies\bf APR\approx 12.14\%`