Find the finance charge per \$100.

advertisement
7-6 HOW DO WE DETERMINE THE ANNUAL
PERCENTAGE RATE (APR)?
1.If you know the number of monthly payments
and the finance charge per \$100 of the amount
financed, you can use a table to find the annual
percentage rate of the loan.
2.You can use the APR of Loans to compare the
relative cost of borrowing money.
Finance Charge per \$100= \$100 x Finance Charge/Amount
Financed
1
LET’s PRACTICE
Paul Norris obtained an installment loan of \$1500 to pay for
his radio equipment. The finance charge is \$146.25. He
agreed to repay the loan in 18 monthly payments. What is
the annual percentage rate?
APR
10.00% 10.25%
10.50%
10.75%
11.00%
11.25%
11.50%
11.75%
12.00%
12.25%
\$3.53
6.62
9.77
12.98
\$3.60
6.76
9.98
13.26
12.5%
Finance Charge Per \$100 of Amount Financed
Term
6
12
18
24
\$2.94
5.50
8.10
10.75
\$3.01
5.64
8.31
11.02
\$3.08
5.78
8.52
11.30
\$3.16
5.92
8.73
11.58
\$3.23
6.06
8.93
11.86
\$3.31
6.20
9.14
12.14
\$3.38
6.34
9.35
12.42
\$3.45
6.48
9.56
12.70
Find the finance charge per \$100. (\$100 x (Finance Charge/Amount Financed)
\$100 x (\$146.25/\$1500.00) = \$9.75 finance charge per \$100
Find the APR. (Refer to the table above)
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%.
2
\$3.68
6.90
10.19
13.54
7-7 Refund of Finance Charge
• 1. If you repay an installment loan that is
not a simple interest installment loan
before the final due date, you may be
entitled to a refund of part of the finance
charge.
2. The refund is usually stated as a percent
of the finance charge.
• Refund = Finance Charge X Percent
Refund
3
LET’s PRACTICE
•
Viola Stambaugh had a 12-month installment loan. The total finance charge on the loan was \$113.80. How much was Viola’s refund if she paid off the loan with the 7th payment?
•
Find the percent refund from table. 19.23%
Find the Refund. (Finance Charge X Percent Refund)
\$113.80 X 19.23% = \$21.88 refund
Term of
Loan
Number of Months Loan Has Run
1
2
3
4
5
6
7
3
50.00
16.67
0
6
71.43
47.62
28.57
14.29
4.76
0
9
80.00
62.22
46.67
33.33
22.22
13.33
6.67
12
84.62
70.51
57.69
46.15
35.90
26.92
19.23
15
87.50
75.83
65.00
55.00
45.83
37.50
30.00
4