Chapter 13, Problem 2CR

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# The effective or true annual interest rate being charged for credit is known as the ______ ____ ______ and is abbreviated ______. (13-1)

To determine

To fill: The blanks provided for the statement, “The effective or true annual interest rate being charged for credit is known as the _____ and is abbreviated_____.”

Explanation

Annual percentage rate means the effective annual interest or the true annual rate of interest is charged for credit.

It can be abbreviated as APR.

The Federal Reserve Board has introduced APR tables like Table 13-1 which can be used to find the value to finance charge per $100 of amount financed. When the APR tables are not given, the APR can be computed by the formula, APR=72I3P(n+1)+I(n1) Where I finance charge on the loan, P is principal or amount financed and n is a number of monthly payment of the loan. For example, if I (finance charge) is$1,200, P (amount financed) is \$6,000 and n (number of payment) is 36, the APR can be computed as follows:

APR=

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