Question

Use a calculator for this exercise.Chuong Ngo borrows $2100 from a bank that advertises a 8% simple interest rate and repays the loan in three equal monthly payments. Estimate the APR. Round to the nearest tenth of a percent. Use the Approximate Annual Percentage Rate Formula.

Answer 1

APR formula:

APR = 2nr / n +1

Where n is the number of payments (3) and r is the simple interest rate in decimal form (8/100)

Replacing:

APR = 2 (3) (0.08 ) / 3 + 1

APR = 0.48 / 4

APR = 0.12

0.12 x 100 = 12%

APR = 12%