Question

Erika Larson purchased a living room set for $4500 from Sentry designs. She made a $500 down payment And finance the balance with an installment loan for 24 months. If her payments are $190 per month what APR has she paying on the loan

Answer 1

Answer:

APR = 7%

Step-by-step explanation:

• The loan amount:

The purchasing value - the pay down = 4500 - 500 = 4000

• The total payment :

The payment per month × the months = 190×24 = 4560

• The payment period:

24 months/12 = 2 years

• The interest amount for 2 years:

The total payment - the loan amount = 4560 - 4000 = 560

• The interest amount for each year = 560/2 = 280

The APR = the interest amount/ the loan amount = $\frac{280}{4000}$ = 7%