Loan amount = $10,000
Monthly payments = $258.50
Time of loan contract = 5 years
True annual interest rate (to the nearest tenth) =
To calculate the true annual interest rate, we need to use the formula for calculating the annual percentage rate (APR). The APR takes into account the interest rate, fees, and other costs associated with the loan.
The monthly payment amount, loan amount, and loan term are the key components we need to calculate the APR. We already have the monthly payment and loan term, but we do not have the interest rate. We can use the following steps to find the interest rate:
Step 1: Calculate the total amount paid:
The total amount paid over the loan term can be found by multiplying the monthly payment by the number of months in the loan term. In this case, the loan term is 5 years, which is equal to 5 x 12 = 60 months. So, the total amount paid would be $258.50 x 60 = $15,510.
Step 2: Calculate the interest paid:
The interest paid on the loan can be found by subtracting the loan amount from the total amount paid. In this case, the loan amount is $10,000, so the interest paid would be $15,510 - $10,000 = $5,510.
Step 3: Calculate the interest rate:
To find the annual interest rate, we need to divide the interest paid by the loan amount and then multiply by 100 to convert it to a percentage. So, the calculation would be ($5,510 / $10,000) x 100 = 55.1%.
Therefore, the true annual interest rate for this loan, rounded to the nearest tenth, is 55.1%.
To calculate the true annual interest rate, you need to know the loan amount, monthly payments, and the time of the loan contract.
Loan amount = $10,000
Monthly payments = $258.50
Time of loan contract = 5 years
Step 1: Convert monthly payments to annual payments.
To find the annual payment, multiply the monthly payment by 12 (since there are 12 months in a year).
Annual payment = Monthly payment x 12
Annual payment = $258.50 x 12 = $3,102
Step 2: Calculate the total amount repaid over the loan term.
To find the total amount repaid, multiply the annual payment by the number of years of the loan contract.
Total amount repaid = Annual payment x Time of loan contract
Total amount repaid = $3,102 x 5 = $15,510
Step 3: Calculate the interest paid.
To calculate the interest paid, subtract the loan amount from the total amount repaid.
Interest paid = Total amount repaid - Loan amount
Interest paid = $15,510 - $10,000 = $5,510
Step 4: Calculate the annual interest rate.
To find the annual interest rate, divide the interest paid by the loan amount. Then, multiply the result by 100 to express it as a percentage.
Annual interest rate = (Interest paid / Loan amount) x 100
Annual interest rate = ($5,510 / $10,000) x 100 = 55.1%
Therefore, the true annual interest rate is approximately 55.1%.
258.50 * 60 = 15,510
15,510 - 10,000 = 5,510 total interest
I = PRT
Solve for R.