Question

s borrows​ $12,000 for a shortterm purpose. The loan will be repaid after 120​ days, with Simpson paying a total of​ $12,400. What is the approximate cost of credit using the​ APR, or annual percentage​ rate, calcula

Answer 1

the approximate cost of credit using the​ APR, or annual percentage​ rate is 10.34%

Step-by-step explanation:

The computation is shown below:

Interest Paid should be

= $12,400 - $12,000

= $400

Now

Cost of capital for 120 days is

= $400 ÷ 12000

= 3.33%

And, finally

Annual percentage rate is

= 3.33% × 365 ÷ 120

= 10.34%

Hence, the approximate cost of credit using the​ APR, or annual percentage​ rate is 10.34%