Question

TED BORROWED $1,200 FOR TWO YEARS AND HE MADE MONTHLY PAYMENTS. IF THE TOTAL FINANCE CHARGE IS $175.92 WHAT IS THE APR?

Answer 1

Given: Ted Borrowed $1200 for two years and made monthly payments. The total finance charge is $175.92

Required: To determine the Annual Percentage Rate.

Explanation: The formula for APR is as follows-

`APR=\lbrace((Fees+Interest))/((Principal)/(n))\frac{}{}*365\rbrace*100`

where n is the total number of days in the loan term.

Here, the total finance charge is $175.92, and the Principal amount is $1200.

Also, n=2 years or 730 days. Substituting these values into the formula as-

`APR=((175.92)/((1200)/(730))*365)*100`

Further solving as-

`APR=7.29\%`

Final Answer: The Annual Percentage Rate is 7.29%