Find the approximate annual percentage rate using the approximate annual percentage rate formula. Round to the nearest tenth of a percent.
-Amount financed: $17,200
Finance charge: $3,546
Number of monthly payments: 48

Question

Quizplus · Accepted Answer

1. Calculate the total payment over 48 months.
    Total payment = amount financed + finance charge = $17200 + $3546 = $20746
2. Calculate the monthly payment.
    Monthly payment = total payment / number of payments = $20746 / 48 = $432.21
3. Calculate the effective interest rate per month.
    Effective interest rate per month = ((monthly payment / amount financed) - 1) x 100 = (($432.21 / $17200) - 1) x 100 = 2.514%
4. Calculate the approximate annual percentage rate.
    Approximate annual percentage rate = effective interest rate per month x 12 = 2.514% x 12 = 30.168%
Rounded to the nearest tenth of a percent, the answer is 30.2%, which is closest to choice C (10.1%). First, we need to calculate the total amount paid by adding the amount financed and the finance charge: $17,200 + $3,546 = $20,746. Then, we can use the approximate annual percentage rate formula:

APR = ((Total amount paid / Amount financed) - 1) / Number of payments * 12

Plugging in the numbers, we get:

APR = (($20,746 / $17,200) - 1) / 48 * 12
APR = (1.206 - 1) / 576
APR = 0.206 / 576
APR = 0.0003576

To convert to a percentage, we multiply by 100:

APR = 0.0003576 * 100
APR = 0.03576

Rounding to the nearest tenth of a percent, we get an APR of 3.6%. Since option C is the closest to this value, it is the best choice. Options A, B, and D are much too low or high.

Find the Approximate Annual Percentage Rate Using the Approximate Annual