Chapter 8: Review and Assessment

List two factors you need in order to determine APR.
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Slide 1: Carte mentale
Business MathSecondary Education

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List two factors you need in order to determine APR.

Slide 1 - Carte mentale

Objectives
  • Determine the annual percentage rate of a loan using a table
  • Calculate the APR using a formula. 
  • Evaluate the calculation using a formula and a table.

Slide 2 - Diapositive

Example 1
Uma Hartmann obtained a $900.00 installment loan to pay for brochures to advertise her new business. The finance charge is $13.14, and she must repay the loan in 6 months. What is the annual percentage rate?

Slide 3 - Diapositive

Answer
Step 1: Find the fi nance charge per $100.
Finance Charge per $100 = $100 ×Finance Charge/Amount Financed
= $100 ×$13.14/$900
$1.46 = $100 × 0.0146
The finance charge per $100 is $1.46.


Slide 4 - Diapositive

Step 2: Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on pages A8–A9.)
In the row for 6 payments, find the number closest to $1.46. It is $1.46. Read the APR at the top of the column. The APR is 5.00%.
 

Slide 5 - Diapositive

For Problems 1–4, refer to the Annual Percentage Rate for Monthly Payment Plans table on pages A8–A9.

Slide 6 - Question ouverte

Answer Here

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Answer

Slide 8 - Diapositive

Example 1
Liam Elliott obtained a $1,700 installment loan to pay for an invisible fence for his dog. The finance charge is $154.25. He agreed to repay the loan in 18 monthly payments. Use the APR formula to determine the annual percentage rate. Round the
answer to the nearest hundredth of a percent.

Slide 9 - Diapositive

Solution
APR = mf(95n+9 )/(12n)(n+1)(4a+f )
 APR = (12 × $154.25)[(95 × 18) + 9]/(12 × 18)(18 + 1)[(4 × $1,700) + $154.25]
APR = $3,181,869/$28,540,242
APR = 0.111487 = 11.15%

Slide 10 - Diapositive

Tynetta Mafundo obtained an installment loan of $3,600.00 to buy a sculpture from the local art gallery. The finance charge is $126.18. She agreed to repay the loan in 18 monthly payments. Use the APR formula to determine the annual percentage rate.
Round the answer to the nearest hundredth of a percent.

Slide 11 - Carte mentale

Answer
APR = (12 × $126.18)[(95 × 18) + 9]/(12 × 18)(18 + 1)[(4 × $3,600) + $126.18]
 APR = $2,602,841.04/$59,615,442.72
 APR = 0.04366051 = 4.37%

Slide 12 - Diapositive

Calculate the APR using a table for the above question.

Slide 13 - Carte mentale

What is the difference in APR for the calculation by formula and using a table?

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Write the main points of the lesson.

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