Question

Mabel bought new laptops at a cost of $5000 at 10% add-on interest for 5 years. Find the APR.

a) 2%
b) 5%
c) 10%
d) 20%

Answer 1

To find the APR, use the formula APR = 100(P/I)(365/n), where P is the principal amount, I is the interest amount, and n is the number of days in a year. Plug in the values and calculate to find the APR.

Step-by-step explanation:

To find the APR (Annual Percentage Rate), we can use the formula: APR = 100(P/I)(365/n), where P is the principal amount, I is the interest amount, and n is the number of days in a year.

In this case, the principal amount (P) is $5000 and the add-on interest is 10% of the principal ($500). So, the interest amount (I) is $500.

Since the loan is for 5 years, we can assume that there are 5 payments per year, making a total of 5*5 = 25 payments.

Plugging in these values into the formula, we get: APR = 100(500/5000)(365/25) = 10%.

Therefore, the APR for this loan is 10% (option c).