Question

You just received a loan from your banker to buy seed and plant your alfalfa field. The loan is a discount loan and is for $5,000 for 1 year and the quoted rate was 10%. What is your APR?

Answer 1

Apr = 11.11%

Step-by-step explanation:

Given:

Discounted amount = $5,000

Number of year = 1

Quoted rate = 10%

Find:

APR

Computation:

Actual loan amount = $5,000[100%/(100%-10%)]

Actual loan amount = $5,000[100%/(90%)]

Actual loan amount = $5,555.56

A = P(1+r)¹

5,555.56 = 5,000( 1 + r )

1.1111 = 1 + r

APR = 0.1111

Apr = 11.11%