Find the annual percentage rate using the table.

-Eileen purchased a sofa for $540 and financed it for 17 months. The total finance charge was $85.48. Find the annual percentage rate.

Question

Find the annual percentage rate using the table.

-Eileen purchased a sofa for $540 and financed it for 17 months. The total finance charge was $85.48. Find the annual percentage rate.

Quizplus · Accepted Answer

The annual percentage rate (APR) can be calculated using the formula for the simple interest rate, which is $I = PRT$, where $I$ is the interest (finance charge), $P$ is the principal amount (initial loan amount), $R$ is the rate of interest per period, and $T$ is the time the money is borrowed for in years. Rearranging the formula to solve for $R$, we get $R = I / (PT)$.Given:- $I = $85.48$- $P = $540$- $T = 17/12$ years (since the finance period is 17 months and there are 12 months in a year)First, calculate the interest rate for the period:$R = 85.48 / (540 * (17/12))$$R ≈ 0.2025$ or 20.25% when converted to a percentage.Therefore, the annual percentage rate is 20.25%.

Find the Annual Percentage Rate Using the Table