Cassandra is repaying an installment loan of 3,500 with 20 equal payments of 196.00 each.What is the annual percentage rate of the loan?
A. 7.55%
B.11.16%
c 12%
d.13.25%
The question is not worded very clearly.
Are the payments made monthly?
Is this a simple interest or compound interest problem?
None of the rates given as choices verify when considering compound interest
so assuming this is simple interest,
interest = 20(196) - 3500 = 420
rate = 420/((3500)(1))= .12 or 12%
Thank you,I put the question down just like it is in my book,I was confused also.I did come up with 12%,so hopefully it is right.Thanks again!
I = PRT
R = I/PT
I = 20(196) - 3500
I = 3920 - 3500
I = 420
T = 20 mo/12
T = 1.667 yr
R = I/PT
R = 420/(3500 * 1.667)
R = 420/5834.5
R = .071986
R = 7.2%
check
I = PRT
I = 3500 x 7.2% x 1.667 yr
I = 252 x 1.667
I = 420.084
I am not a tutor
To find the annual percentage rate (APR) of a loan, we can use the formula:
APR = (Total Interest Paid / Total Principal) * (1 / Number of Years) * 100
In this case, Cassandra is repaying a loan of $3,500 with 20 equal payments of $196.00 each.
To calculate the APR, we need to determine the total interest paid and the total principal.
The total principal is simply the amount of the loan, in this case, $3,500.
To find the total interest paid, we can calculate the total amount repaid and subtract the principal.
Total Amount Repaid = 20 payments * $196.00 = $3,920.00
Total Interest Paid = Total Amount Repaid - Total Principal
Total Interest Paid = $3,920.00 - $3,500.00 = $420.00
Now that we have the total interest paid ($420.00) and the total principal ($3,500), we can calculate the APR using the formula mentioned earlier.
APR = ($420.00 / $3,500.00) * (1 / 1) * 100
APR = 0.12 * 100 = 12%
Therefore, the annual percentage rate (APR) of the loan is 12%.
The correct answer is C. 12%.