Use a calculator for this exercise.Chuong Ngo borrows $3200 from a bank that advertises a 6% simple interest rate and repays the loan in four equal monthly payments. Estimate the APR. Round to the nearest tenth of a percent. Use the Approximate Annual Percentage Rate Formula.
Question
Use a calculator for this exercise.Chuong Ngo borrows $3200 from a bank that advertises a 6% simple interest rate and repays the loan in four equal monthly payments. Estimate the APR. Round to the nearest tenth of a percent. Use the Approximate Annual Percentage Rate Formula.
Solution
To calculate the APR (Annual Percentage Rate), we can use the formula:
APR = 2 * n * I / (P * (n + 1))
Where:
- n is the number of payments per year
- I is the total interest paid
- P is the principal, or the amount borrowed
First, we need to calculate the total interest paid. The bank advertises a 6% simple interest rate, so the total interest paid over the course of the loan is:
I = P * r * t I = 64
Then, we can substitute the values into the APR formula:
APR = 2 * 12 * 3200 * (12 + 1)) APR = 0.2369
To convert this to a percentage and round to the nearest tenth of a percent, we multiply by 100:
APR = 0.2369 * 100 APR = 23.7%
So, the estimated APR for the loan is 23.7%.
Similar Questions
A restaurant borrows $15,700 from a local bank for 2 months. The local bank charges simple interest at an annual rate of 10% for this loan. Assume each month is 112 of a year. Answer each part below.Do not round any intermediate computations, and round your final answers to the nearest cent.
The residents’ association of a retirement village needs $275 000 to upgrade the village’s facilities.The association obtains a 5-year, interest-only loan for $275 000 that charges a flat interest rate of5.2% per annum.(a) Calculate the quarterly interest payment for the interest-only loan.(1 mark)In order to repay the loan, the association sets up a sinking fund and plans to make monthlypayments of $4116.44 over the 5 years. The sinking fund earns interest at a rate of 4.3% per annum,compounded monthly.(b) Calculate the total cost of the interest-only loan and the sinking fund
A company borrows money as needed on the first day of the month and repays principal and interest on the last day of the budget period, if cash is available. For the third quarter of the year, they borrowed $5,000 in July, $7,000 in August and $4,000 in June. The interest rate is 1% per month. Assuming enough money is available on June 30th to repay the debt, the total amount of interest due is $
The monthly payment for a $12,000 loan at 8% interest
If you borrow N$150,000 for a house at an 8% compound annual interest rate for 30 years, what is your monthly payment?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.