Personal Finance - APR

Annual Percentage Rate Formula

APR APR 2 2 n n f fP (N P (N 1) 1)

nn == nnumber of payment periods in one yearumber of payment periods in one year ff == ffinance chargeinance charge PP== PPrincipal or amount borrowedrincipal or amount borrowed- remember to subtract down payment from cash - remember to subtract down payment from cash priceprice NN== total total NNumber of paymentsumber of payments

Details on the item: Cash price of item - $1450 Number of payments -24 Amount per payment - $53 Down payment - $250

Step 1 – Finding total cost Number of payments * amount per payment 24 * 53 = $1272 Then add the down payment 1272 + 250 = $1522

Items total cost is $1522 (This would be the total installment price)

Step 2 – Finding the finance charge Total cost – cash price 1522 – 1450 = 72

Step 3 - APR Equation from slide 2

(2 * 12 * 72) (1200 *(24 +1)) =.0576 = 5.76%*to find principal take cash price – down

payment