Question

Eric borrowed money from his credit union using his car as collateral. The monthly interest rate on the loan is 0.6%. There were no other fees associated with the loan. What is the APR of his car loan? Assume 12 equal months.

A) 4.99%
B) 6.54%
C) 7.44%
D) 7.20%

Answer 1

The APR of Eric's car loan is 7.2%.

Step-by-step explanation:

To calculate the Annual Percentage Rate (APR) of Eric's car loan, we need to first convert the monthly interest rate to an annual rate. Since there are 12 months in a year, the annual interest rate will be 12 times the monthly interest rate. So, the annual interest rate is 0.6% x 12 = 7.2%.

The APR of Eric's car loan is 7.2%.