Question

Tim Worker buys a new sofa for $629.95. He pays 25% down and takes an installment loan to complete the purchase. He makes 12 payments which include his principal and a $60.00 finance charge. What is the APR on his loan to the nearest tenth?
The down payment is $

The amount financed is $

The monthly payment will be $

At the end of one year the monthly payments will total $

The finance charge for one year ÷ amount financed is

Answer 1

Answer:

Step-by-step explanation:

1. 472.46

2. 157.49

3. 44.37

4. 532.44

5. 12.7%

Answer 2

Let's work the problem step by step. 
Tim buys a sofa for $629.95, paying 25% down and getting a loan for the balance. So $629.95 - $629.95 * 0.25 = $629.95 - $157.49 = $472.46  
Now Tim needs to add in the $60.00 finance charge to the balance owed. $472.46 + $60.00 = $532.46 
 Tim's APR will be the amount of the finance charge divided by the amount of the loan. So
 $60.00 / $472.46 = 0.126994878 = 12.7% 
 And each of Tim's month payments will be 1/12 of the amount owed. So $532.46 / 12 = $44.37 
 After 1 year, his payments will be:
 $44.37 * 12 = $532.44 
 So with the above calculations, the answers are:
 What is the APR on his loan to the nearest tenth?
 The down payment is $157.49
 The amount financed is $472.46
 The monthly payment will be $44.37
 At the end of one year the monthly payments will total $532.44
 The finance charge for one year Ă· amount financed is 12.7%