   Chapter 13.II, Problem 21RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

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

# Calculate the finance charge and the annual percentage rate for the following installment loans by using the APR formula. Amount Number of Monthly Finance Financed Payments Payment Charge APR 21. $500 12$44.25 $31.00 11.25% To determine To calculate: The finance charge and annual percentage rate if amount financed is$500, number of payments is 12 and monthly payment is $44.25. Explanation Given Information: The amount financed is$500, number of payments is 12 and monthly payment is $44.25. Formula used: When the table to compute APR is not given, the annual percentage rate (APR) is computed by the formula: APR=72I3P(n+1)+I(n1) Where, I is finance charge on the loan, P is principal or amount financed and n is number of monthly payment of the loan. Calculation: Consider that amount financed is$500, number of payments is 12 and monthly payment is $44.25. Compute the total amount of installment payments by substituting monthly payment and number of monthly payments in the formula: Total amount of installment payments=Payment per month×Number of monthly payments=$44.25×12=$531 Hence, the total amount of installment payment is$531.

Compute the finance charge by substituting total amount of installment payment and amount financed in the formula:

Finance charge=Total amount of installment paymentAmount financed=531$500=$31

Hence, the finance charge is \$31

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