Question

For the following​ loan, find ​(a) the finance charge and ​(b) the APR. Use the accompanying table to find the APR to the nearest​ 0.5%.

Margey bought a new horse trailer for ​$5500.She paid $2000 down and paid the remainder at $205 per month for 1 and 1/2 years.

Answer 1

The finance charge for the loan is -$1,810 and the approximate APR is 14.5%.

Step-by-step explanation:

To find the finance charge, we need to calculate the total amount paid over the course of the loan and subtract the original loan amount. The total amount paid can be found by multiplying the monthly payment ($205) by the number of months (1.5 years x 12 months/year = 18 months). Hence, the total amount paid is $205 x 18 = $3,690. The finance charge is the difference between the total amount paid and the loan amount, which is $3,690 - $5,500 = -$1,810.

The APR (Annual Percentage Rate) represents the cost of borrowing on an annual basis. However, in this case, we don't have the exact APR rate, only a table to approximate it. Using the table, we can find the closest APR rate to the given terms. In this case, the closest APR rate is approximately 14.5%.