The medical office purchased new computers at a cost of $1,855 at 14% add-on interest for 2 years. Find the APR (rounded to the nearest tenth of a percent) for the loan.
To find the Annual Percentage Rate (APR) for the loan, we can use the formula:
APR = (Add-on Interest / Principal) × (1 / Time)
In this case, the add-on interest is 14% of the principal, and the time is 2 years. The principal is the cost of the computers, which is $1,855.
First, calculate the add-on interest:
Add-on Interest = Principal × (Interest Rate / 100)
Add-on Interest = $1,855 × (14 / 100)
Add-on Interest ≈ $259.70
Next, plug the values into the formula to find the APR:
APR = ($259.70 / $1,855) × (1 / 2)
APR ≈ 0.1399
Finally, round the APR to the nearest tenth of a percent:
APR ≈ 13.99%
Therefore, the APR for the loan is approximately 13.99%.