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Section ObjectiveSection ObjectiveUse a table to find:
• annual percentage rate of a loan
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Finance Charge per $100 =
$100 × (Finance Charge ÷ Amount Financed)
Formula Formula
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Given Chen’s situation, do you think it’s a good idea to take out a loan for a vacation? Should he wait and save up money to afford the trip?
A Picture Perfect Loan p. 300A Picture Perfect Loan p. 300
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Paul Norris obtained an installment loan of $1,500.00 to pay for a computer. The finance charge is $146.25. He agreed to repay the loan in 18 monthly payments.
What is the annual percentage rate?
Example 1Example 1
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Find the finance charge per $100.
$100 × (Finance Charge ÷ Amount Financed)
$100 × ($146.25 ÷ $1,500.00)
$100 × 0.0975 = $9.75
Example 1 Answer: Example 1 Answer: Step 1Step 1
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Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on page 300.)
In the row for 18 payments, find the number closest to $9.75. It is $9.77. Read the APR at the top of the column.
APR is 12.00%.
Example 1 Answer: Example 1 Answer: Step 2Step 2
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A 54-inch HDTV is for sale for $1,899.92 cash or $177.83 per month for 12 months.
What is the APR?
Example 2Example 2
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Find the finance charge.
Total Payback – Amount Financed
(12 × $177.83) – $1,899.92
$2,133.96 – $1,899.92 = $234.04
Example 2 Answer: Example 2 Answer: Step 1Step 1
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Find the finance charge per $100.
$100 × (Finance Charge ÷ Amount Financed)
$100.00 × ($234.04 ÷ $1,899.92)
$100.00 × 0.12318 = $12.32
Example 2 Answer: Example 2 Answer: Step 2Step 2
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Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on pages 794-795 of your textbook.)
In the row of 12 payments, find the number closest to $12.32. It is $12.31. Read the APR at the top of the column.
APR is 22.00.
Example 2 Answer: Example 2 Answer: Step 3Step 3
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Brenda Richards obtained an installment loan for $2,125. She agreed to repay the loan in 12 monthly payments of $189.
What is the APR?
Practice 1Practice 1
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12.25 percent
Practice 1 AnswerPractice 1 Answer
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Natalie Rubino is planning to borrow $2,800 for a new furnace. Bell Finance will loan her the money for 24 months at a finance charge of $428. TRC Finance will loan her the money for a finance charge of $418.
What is the APR on each loan?
Practice 2Practice 2
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Bell Finance: 14 percent
TRC Finance: 13.75 percent
Practice 2 AnswerPractice 2 Answer
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Determining the APR8-6END OF SECTIONEND OF SECTION