   Chapter 13.II, Problem 23RE ### 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 23. $13,000 48$373.75

To determine

To calculate: The finance charge and annual percentage rate if amount financed is $13,000, number of payments is 48 and monthly payment is$373.75.

Explanation

Given Information:

The amount financed is $13,000, number of payments is 48 and monthly payment is$373.75.

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 $13,000, number of payments is 48 and monthly payment is$373.75.

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=$373.75×48=$17,940

Hence, the total amount of installment payment is $17,940. Compute the finance charge by substituting total amount of installment payment and amount financed: Finance charge=Total amount of installment paymentAmount financed=$17,940$13,000=$4,490

Hence, the finance charge is \$4,490

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