Find the APR (rounded to the nearest percent) for the loan below. Purchased a dining room set for $4,000 at 9% add-on interest for 2 years.
A) $18 \%$
B) $15 \%$
C) $17 \%$
D) $12 \%$
E) $5 \%$

Question

Quizplus · Accepted Answer

Since this is an add-on interest loan, we first need to calculate the total interest paid over the 2-year period, which is $4,000 x 9% x 2 = $720. The total amount paid over the 2-year period would be $4,000 + $720 = $4,720. To find the APR, we need to calculate the equivalent simple interest rate for this loan. Using the formula for simple interest: 
$$I = Prt$$
where $I$ is the interest, $P$ is the principal, $r$ is the interest rate and $t$ is the time in years. Rearranging the formula to solve for $r$: 
$$r = \frac{I}{Pt}$$
Plugging in the values we have: 
$$r = \frac{720}{4000 \cdot 2} = 0.09$$
Converting to a percentage, the APR is 9% x 12 = 108%, rounded to the nearest percent, which is 17%. Therefore, the correct answer is C.

Find the APR (Rounded to the Nearest Percent) for the Loan