Solve the problem. Use the approximate APR formula to estimate the APR, and round rates to the nearest tenth of a percent.
-Jordan wants to buy an electric guitar for $320. The music store offers to let him buy it on credit, paying only $11.14 per month for 33 months. What is the finance charge? What is the approximate annual percentage rate?

Question

Quizplus · Accepted Answer

To find the finance charge, we can first calculate the total amount Jordan will pay:

$11.14/month x 33 months = $367.62

The finance charge is then:

$367.62 - $320 = $47.62

To estimate the APR, we can use the approximate APR formula:

2 x (finance charge / total amount financed) x (12 / n x (n+1))

Plugging in the values:

2 x ($47.62 / $320) x (12 / 33 x (33+1))

Simplifying:

2 x 0.14819 x 0.359 = 0.1008 or 10.1% (rounded to the nearest tenth)

Therefore, the closest answer is C ($47.62, 10.5%).

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