Find the approximate annual percentage rate using the approximate annual percentage rate formula. Round to the nearest tenth of a percent.
-Amount financed: $315
Finance charge: $26
Number of monthly payments: 12

Question

Quizplus · Accepted Answer

1. Find the total amount to be repaid: 
   Total amount to be repaid = Amount financed + Finance charge = $315 + $26 = $341

2. Find the total interest paid: 
   Total interest paid = Total amount to be repaid - Amount financed = $341 - $315 = $26

3. Use the approximate annual percentage rate formula: 
   APR = (2 x Total interest paid x 12) / (Amount financed x (Number of payments + 1)) x 100 
       = (2 x 26 x 12) / (315 x (12 + 1)) x 100 
       ≈ 15.2%
       
Thus, the best choice is C, which is the closest to the calculated APR. 1. First, calculate the total amount paid by adding the amount financed and finance charge: 
$315 + $26 = $341

2. Next, calculate the monthly payment by dividing the total amount paid by the number of monthly payments: 
$341 ÷ 12 = $28.42

3. Use the approximate annual percentage rate formula, which is: 
(APR) = (2 x Monthly Payment x Number of Payments - Amount Financed) / Amount Financed x Number of Payments x (Number of Payments - 1)

(APR) = (2 x $28.42 x 12 - $315) / $315 x 12 x (12-1) 
(APR) = (2 x $341.04 - $315) / $3780 x 11 
(APR) = $682.08 - $315 / $41,580 
(APR) = $367.08 / $41,580 
(APR) = 0.0088

4. Convert the decimal to a percentage and round to the nearest tenth of a percent: 
0.0088 x 100 = 0.88% 
Rounded to the nearest tenth of a percent, the APR is 0.9%, which is answer choice C.

Find the Approximate Annual Percentage Rate Using the Approximate Annual