# SECTION 8-6 Determining the APR pp. 300-303.

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SECTION 8-6 Determining the APR pp

Section Objective Use a table to find:
annual percentage rate of a loan

Formula Finance Charge per \$100 =
\$100 × (Finance Charge ÷ Amount Financed)

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?

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?

Example 1 Answer: Step 1 Find the finance charge per \$100.
\$100 × (Finance Charge ÷ Amount Financed) \$100 × (\$ ÷ \$1,500.00) \$100 × = \$9.75

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%.

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

Example 2 Answer: Step 1 Find the finance charge.
Total Payback – Amount Financed (12 × \$177.83) – \$1,899.92 \$2, – \$1, = \$234.04

Example 2 Answer: Step 2 Find the finance charge per \$100.
\$100 × (Finance Charge ÷ Amount Financed) \$ × (\$ ÷ \$1,899.92) \$ × = \$12.32

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

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?

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?

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

END OF SECTION 8-6 Determining the APR