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a you the 5-44
a you the 5-44. To purchase a used automobile, you borrow $10,000 from Loan Shark Enterprises. They tell interest rate is 1% per month for 35 months. They also charge you $200 for a credit investigation, so you leave with $9,800 in your pocket. The monthly payment they calculated for you is $10,000 (0.1) (35) + $10,000 35 = $385.71/month If fyou agree to these terms and sign their contract, what is the actual APR (annual percentage rate) that you are paying? (5.6)
Expert Solution
Annual percentage rate or APR shows the actual cost of any loan .It can be calculated by the steps below
?????? Principal amount = 10000
Rate of interest monthly = 1% =.01
Years= 2 year and 11 months = 2.9167. OR 35 mnth
Monthly payment =$385.71
- 385.71×35=$13499.85 (total payment he has to pay back)
- 13499.85-10000= $3499.85 (total interest fees)
- 3499.85÷2.9167= $1206.84 (yearly interest amount)
- 1206.84÷13499.85 = 0.0894 ( APR)
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