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 amount financed and what is the APR on his loan?
Amount financed = $__________
APR (to the nearest tenth) = _________%

Answer 1

The amount of the down payment is
629.95×0.25=157.49

Amount financed
629.95−157.49=472.46

Monthly payment
(472.46÷12)+(60÷12)=44.37

Total monthly payments
44.37×12=532.44

Finance charge
532.44−472.46=59.98

APR
59.98÷472.46=0.127×100=12.7%

Answer 2

Answer:

Amount financed = $ 472.4625

APR = 12.7%

Step-by-step explanation:

Given,

The original price of the sofa = $629.95,

Down payment percentage = 25% ,

∴ Amount of down payment = 25% of 629.95

$=\frac{25\times 629.95}{100}$

$=\frac{629.95}{4}$

= $ 157.4875,

So, the amount financed = $629.95 - $ 157.4875 = $ 472.4625,

Now, finance charge = $ 60,

Thus, APR = $\frac{\text{Finance charge}}{\text{Amount financed}}\times 100$

$=\frac{60}{472.4625}\times 100$

$=\frac{6000}{472.4625}$

= 12.6994 %

≈ 12.7%