Question

Tim Smith has a $90,000 loan. His monthly payment is given in the table above. He paid $1,500 in fees and $6,271.04 in total interest the first year of the loan. If the APR is finance charge (interest plus fees) for one year ÷ amount financed, what was the APR for that year?

Answer 1

The answer would be 8.6%

Answer 2

8.6%

Explanation:

Given : Tim Smith has a $90,000 loan. He paid $1,500 in fees and $6,271.04 in total interest the first year of the loan.

To Find : If the APR is finance charge (interest plus fees) for one year ÷ amount financed, what was the APR for that year?

Solution :

Fees = $1,500

Interest = $6,271.04

Amount financed = $90,000

Financed charge= Fees + Interest = $1,500+$6,271.04 =$7771.04

Since APR = finance charge (interest plus fees) for one year ÷ amount financed,

=
`(7771.04)/(90,000)`

=0.086

APR = 0.086*100=8.6%

Thus APR for that year is 8.6%