Question

TED BORROWED $1,200 FOR TWO YEARS AND HE MADE MONTHLY PAYMENTS. IF THE TOTAL FINANCE CHARGE IS $175.92 WHAT IS THE APR? ANNUAL PERCENT RATE?

Answer 1

Given:

The borrowed amount is $1200.

The finance charge is $175.92

The period of time =2 years ( 24 months)

Required:

We need to find APR.

Step-by-step explanation:

Let r be the APR.

The monthly interest rate is r/12.

`Total\text{ amount =1200+175.92=1375.92}`

P=1200 and t =24.

`Total\text{ amount =P\lparen1+}(r)/(n)\text{\rparen}^(nt)`
`1375.92=1200(1+(r)/(12))^(12*2)`
`1375.92=1200(1+(r)/(12))^(24)`
`(1375.92)/(1200)=(1200)/(1200)(1+(r)/(12))^(24)`
`1.1466=(1+(r)/(12))^(24)`
`1.00571631955=1+(r)/(12)`
`1.00571631955-1=(r)/(12)`
`0.00571631955*12=r`
`0.06859583463=r`

Multiply by 100, to find APR

`6.86\text{ \%}=APR`

Final answer:

`APR=6.82\text{ \%}`