1. SECTION
8-6
Determining the APR pp

2. Section Objective Use a table to find:
annual percentage rate of a loan

3. Formula Finance Charge per $100 =
$100 × (Finance Charge ÷ Amount Financed)

4. A Picture Perfect Loan p. 300
Given Chen’s situation, do you think it’s a good idea to take out a loan for a vacation? Should he wait and save up money to afford the trip?

5. Example 1
Paul Norris obtained an installment loan of $1, to pay for a computer. The finance charge is $ He agreed to repay the loan in 18 monthly payments.
What is the annual percentage rate?

6. Example 1 Answer: Step 1 Find the finance charge per $100.
$100 × (Finance Charge ÷ Amount Financed)
$100 × ($ ÷ $1,500.00)
$100 × = $9.75

7. Example 1 Answer: Step 2
Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on page 300.)
In the row for 18 payments, find the number closest to $9.75. It is $9.77. Read the APR at the top of the column.
APR is 12.00%.

8. Example 2
A 54-inch HDTV is for sale for $1, cash or $ per month for 12 months.
What is the APR?

9. Example 2 Answer: Step 1 Find the finance charge.
Total Payback – Amount Financed
(12 × $177.83) – $1,899.92
$2, – $1, = $234.04

10. Example 2 Answer: Step 2 Find the finance charge per $100.
$100 × (Finance Charge ÷ Amount Financed)
$ × ($ ÷ $1,899.92)
$ × = $12.32

11. Example 2 Answer: Step 3
Find the APR. (Refer to the Annual Percentage Rate for Monthly Payment Plans table on pages of your textbook.)
In the row of 12 payments, find the number closest to $ It is $ Read the APR at the top of the column.
APR is

12. Practice 1
Brenda Richards obtained an installment loan for $2,125. She agreed to repay the loan in 12 monthly payments of $189.
What is the APR?

13. Practice 1 Answer
12.25 percent

14. Practice 2
Natalie Rubino is planning to borrow $2,800 for a new furnace. Bell Finance will loan her the money for 24 months at a finance charge of $428. TRC Finance will loan her the money for a finance charge of $418.
What is the APR on each loan?

15. Practice 2 Answer
Bell Finance: 14 percent
TRC Finance: percent

16. END OF SECTION
8-6
Determining the APR