Final answer:
The finance charge is the cost of credit expressed as a dollar amount, while APR is the yearly interest rate. Calculations for monthly and annual payments of loans and credit debts utilize these charges and rates to determine the amount due over the repayment period.
Step-by-step explanation:
The cost of credit expressed as a dollar amount is defined as the finance charge. The Annual Percentage Rate (APR), on the other hand, is the cost of credit expressed as a yearly interest rate.
For example, if you have a credit card bill of $5,000 with an APR of 24.99% and plan to pay it off over 3 years, the monthly payments would be calculated based on the APR and the terms of the repayment.
Similarly, for a 15 year student loan of $200,000 at 6.8% interest, one would calculate the annual payments taking into account the interest rate and loan duration.