A student has a total of $3000 in student loans that will be paid with a 48-month installment loan with monthly payments of $73.94. Determine the APR of the loan to the nearest one-half of a
Percent.

Question

Quizplus · Accepted Answer

The APR can be calculated using the formula for the monthly payment on an installment loan, which involves the loan amount, the monthly interest rate, and the number of payments. Given the total loan amount ($3000), the monthly payment ($73.94), and the total number of payments (48 months), we can use these values to back-calculate the APR. The exact calculation requires iterative methods or a financial calculator, as it involves solving for the interest rate in the annuity formula. When we input these values into a financial calculator or an appropriate financial function in a spreadsheet, we find that the APR that results in a monthly payment closest to $73.94 is approximately 8.5%.

A Student Has a Total of $3000 in Student Loans