5,590 Financed with finance charge of $1693.77 with 36 payments. What is approximate annual per centage rate
1693.77 / 5590 = 0.303
0.303 / 3 = 0.101 = 10% annual percentage rate
We would have to solve the equation
7283.77 = payment( (1+i)^36 - 1)/i , where i is the monthly rate
There are two unknowns in that ONE equation, namely i and payment, so it cannot be solved.
To calculate the approximate annual percentage rate (APR), we need to use the formula:
APR = (Finance Charge / Loan Amount) * (12 / Number of Payments) * 100
First, let's determine the loan amount. Since the finance charge is the extra amount paid on top of the financed amount, we can subtract it from the total amount financed:
Loan Amount = Total Amount Financed - Finance Charge
In this case, the total amount financed is $5,590, and the finance charge is $1,693.77.
Loan Amount = $5,590 - $1,693.77 = $3,896.23
Next, we can substitute the values into the formula:
APR = ($1,693.77 / $3,896.23) * (12 / 36) * 100
Simplifying this equation, we get:
APR = (0.4349) * (0.3333) * 100
APR ≈ 14.496%
Therefore, the approximate annual percentage rate (APR) for this loan is approximately 14.496%.