   Chapter 13.II, Problem 6TIE ### 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

# Erica Larsen purchased a living room set for $4,500 from Century Designs. She made a$500 down payment and financed the balance with an installment loan for 24 months. If her payments are $190 per month, what APR is she paying on the loan? To determine To calculate: The annual percentage rate if Erica Larsen purchased a living room for$4,500, paid down payment is $500, payment per month$190 and time period for loan is 24 months.

Explanation

Given Information:

Erica Larsen purchased a living room for $4,500, paid down payment is$500, payment per month $190 and time period for loan is 24 months. Formula used: Follow the steps to compute the annual percentage rate using the APR table Step 1: The formula for finance charge per$100 can be computed:

Finance charge per $100=Finance charge×100Amount financed Step 2: From table 13-1, note the number of payment column to the number of payments for the loan. Step 3: Note the right number of payment row to the table factor that is closely related to the finance charge per$100

Total amount of installment payments=Amount financed+finance charge

Step 4: Look at the top of the column for the APR of the loan.

Calculation:

Consider that amount of purchase price is $4,500, paid down payment is$500 and payment per month $190 and time period for loan is 24 months. Compute amount financed by substituting purchase price to$4,500 and down payment to $500, Amount financed=Purchase priceDown payment=4,500500=$4,000

Hence, the amount financed is $4,000. Compute the total payments by substituting payment per month$190 and time period for loan is 24 months

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