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SECTION 8-6 Determining the APR pp

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**Section Objective Use a table to find:**

annual percentage rate of a loan

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**Formula Finance Charge per $100 =**

$100 × (Finance Charge ÷ Amount Financed)

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**A Picture Perfect Loan p. 300**

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?

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Example 1 Paul Norris obtained an installment loan of $1, to pay for a computer. The finance charge is $ He agreed to repay the loan in 18 monthly payments. What is the annual percentage rate?

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**Example 1 Answer: Step 1 Find the finance charge per $100.**

$100 × (Finance Charge ÷ Amount Financed) $100 × ($ ÷ $1,500.00) $100 × = $9.75

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Example 1 Answer: Step 2 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%.

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Example 2 A 54-inch HDTV is for sale for $1, cash or $ per month for 12 months. What is the APR?

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**Example 2 Answer: Step 1 Find the finance charge.**

Total Payback – Amount Financed (12 × $177.83) – $1,899.92 $2, – $1, = $234.04

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**Example 2 Answer: Step 2 Find the finance charge per $100.**

$100 × (Finance Charge ÷ Amount Financed) $ × ($ ÷ $1,899.92) $ × = $12.32

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Example 2 Answer: Step 3 Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on pages of your textbook.) In the row of 12 payments, find the number closest to $ It is $ Read the APR at the top of the column. APR is

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Practice 1 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?

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Practice 1 Answer 12.25 percent

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Practice 2 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?

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Practice 2 Answer Bell Finance: 14 percent TRC Finance: percent

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END OF SECTION 8-6 Determining the APR

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