Chapter 13.II, Problem 26RE

### 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

# 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 26. $8,850 30$333.35

To determine

To calculate: The finance charge and annual percentage rate if amount financed is $8,850, number of payments is 30 and monthly payment is$333.35.

Explanation

Given Information:

The amount financed is $8,850, number of payments is 30 and monthly payment is$333.35.

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 $8,850, number of payments is 30 and monthly payment is$333.35.

Compute the total amount of installment payments by substituting monthly payment and number of monthly payments:

Total amount of installment payments=Payment per month×Number of monthly payments=$333.35×30=$10,000.5

Hence, the total amount of installment payment is $10,000.5. Compute the finance charge by substituting total amount of installment payment and amount financed: Finance charge=Total amount of installment paymentAmount financed=$10,000

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